Money is a part of life, whether you like it or not. There’s no way around it. That’s why it’s important to make sure you are on track with your money. The train needs to be on the tracks and not veering off course.
Financial Checkups
The best way to make sure you’re on track with your money is by doing periodic financial checkups. For some, this means regularly meeting with their financial advisor. For others, it’s running the numbers and checking their net worth every few months.
This post is going to bring up a few key areas and then you decide whether you’re on track in these areas. If you are, then you’re ahead of the game. If you’re not, there’s some work to do. The good news is you’re the driver and can put things back on track in a hurry.
How to Tell if You’re on Track With Your Money
Here’s some important things to look at to see if you’re on track with your money, starting with being out of consumer debt.
Number 1: Out of Consumer Debt
Getting out of consumer debt is one of the most powerful things anyone can do to better their financial situation. It completely reverses your trajectory of putting money into debts with a very high interest rate to keeping the money for yourself. Not only does it save on the interest, but it also frees up the money you were spending on principal, so it’s a double win.
Being out of consumer debt also means less financial responsibility. For example, if someone currently has $1,500 per month going towards paying off consumer debt, that’s a $1,500 per month obligation. Once that debt is gone, the obligation is also gone.
That will allow someone to do all of the following and much more:
- Invest more
- Save the difference
- Travel
- Take a risk by quitting their job and starting a company or get into lower paying work with more upside
Number 2: An Emergency Fund
If you’re out of consumer debt and have an emergency fund, you are already way ahead of the game. Most personal finance experts recommend between three to six months of an emergency fund, depending on how secure and predictable your income is. I personally like to have more but that’s more of a personal preference and not necessarily based on sound math.
So if you’ve got an appropriate emergency fund and feel good about the amount you have saved, you are doing really well and are on track.
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Number 3: Investing in Something
I’m not here to tell you what to invest in. What I will say though is to invest in something. Whether it be stocks, real estate, private lending or whatever you choose to invest in, pick something and invest.
If you haven’t already started, begin now so compounding can start. The more and earlier you invest, the more compounding has a chance to kick in. There’s a lot of noise about what to invest in, as well as a lot of false promises.
The truth is to just start investing after you’ve vetted it. Then invest regularly and keep doing it.
Number 4: Have Systems Set Up
Life is about having good systems. Like James Clear suggested in Atomic Habits, putting out your running shoes and attire before you go to bed is a great system to reduce the friction the next morning. If you’ve got the shoes, shorts, and shirt ready to go, you’re likely to put on those clothes and go for your run.
However, if you have to go digging in the closet for those clothes, you’re increasing the friction, and are less likely to perform the activity. Same goes for money.
Have systems set up where it’s easy to succeed. Automate your income so that you’re regularly investing so you don’t have to think about it. Over time, this money grows significantly and you’ll be not only on track, but way ahead of the game.
Number 5: Housing Situation Under Control
There are four main expenses: housing, transportation, food, and insurance. If you can get your housing situation under control, you’re a step ahead. This could be owning or renting, it doesn’t mean you have to buy a property.
If you find a great rental with low monthly rent, you’re in a good spot. If you have a house, condo, or other type of property that you own and it’s affordable, even better. The point is, whatever your housing situation is, get it under control so your money and time can be freed up for other things.
Number 6: Developing Your Financial Mind
When you take the time to educate yourself about money, you begin to develop an entire new understanding of it. This will help guide current and future decisions. No matter what happens with the economy, your investment portfolio, or with other people, the one constant is your mind.
If you’re doing things to develop your mind, you are on the right track. Things like:
- Reading quality books
- Listening to podcasts
- Customizing your social media feed to give you educational and positive content
- Getting a mentor
Number 7: Protecting Loved Ones
If you don’t have kids, a family, or anyone you’re responsible for, you won’t need to worry about this one. But if you do, pay attention.
Protect your loved ones by getting things like:
- A will and trust
- Insurance
- An estate plan
Things like this aren’t fun or sexy, but they will protect your loved ones if the unexpected happens with your health.
Conclusion
You don’t have to wonder if you are on track with your money. If you went through this list of items and are doing well in all or most of them, you’re on track.
If you’ve got work to do on all or most of them, then keep at it. The important thing is that you’re moving forward and making progress.
Are you on track with your personal finances?
