• 73°

Mitzi Parker: Time for your annual financial checkup?

Does your money go as far as you think it should? If not, your household finances may be due for a checkup. Taking time to review family spending patterns is a good way to find budget leaks and other potential problems. The sooner you fix and repair budget issues the better. A yearly checkup will enable you to take charge of your finances so you are in control of your money.

Have you noticed that your paycheck doesn’t seem to go nearly as far as it did a few years ago? The economy is improving, but the cost of everything from groceries to cars has risen faster than wages for most Americans. The golden rule of money management is to spend less than you earn. Don’t get into the habit of using credit to make up the difference between expenses and household income. Running up credit card balances to make up for lost spending power invites trouble.

To improve your monthly bottom line, develop and implement a plan to balance the household budget. Here are some suggestions to help you develop your plan:

• Shop around. The cost of services such as cable TV, cell phones, Internet acces, and property insurance coverage has a way of creeping up. Shop around. Call your current providers and ask if you qualify for a better rate; companies rarely offer you a better deal unless you ask!

• Evaluate your mortgage and home equity debt. If you have an excellent credit score and sufficient equity in your home, combining and refinancing any outstanding balance on your high-rate home mortgage and home equity loans is an attractive option. You may want to consider refinancing if the interest rate on your current loans is at least two points higher than market rates.

• Eliminate debt. Stop using credit and make the minimum monthly payment on all your credit cards EXCEPT the one with the highest interest rate. Apply any extra dollars to the credit card with the highest APR until it is paid off. Then use the same strategy on the card with the next highest APR. Commit to paying the same amount each month until all your credit cards are paid off to speed up the time to get out of debt and significantly reduce your finance charges. Imagine how much extra money you would have each month if you didn’t have to pay finances charges.

• Scrutinize household bills. Eliminate services you don’t use, no longer need, or can live without.

• Track your spending. Want to increase your pay by 20 percent? Find out where your money goes. Most families can save as much as 20 percent just by paying more attention to how they spend the money they have. Small, frequent purchases can really add up.

• Prioritize your spending. Ranking your expenses from most to least important helps with decisions about where to cut back.

• Target areas of overspending for action. Focusing on one or two areas at a time is more successful than trying to change everything at once.

• Establish an emergency savings fund. Financial experts recommend keeping three to six months of living expenses in an account where you can get it if you need it. With six months of expenses in the bank, a lay-off or medical emergency is much less stressful. The additional savings also enables you to raise your insurance deductibles to save money on premiums.

• Involve everyone in the household in discussions on how to save money. Kids come up with great ideas, especially if they share in the rewards of any savings through a family outing or fun activity. They are also more likely to follow the plan if there is something in it for them.

Take charge of your finances with an annual financial checkup. Automatic pilot works for a while, but it pays to take a look at where your hard-earned money goes at least once a year.

Mitzi Parker is Sumter County Extension agent/Family and Consumer Science, University of Georgia Cooperative Extension Service. Contact him at 229-924-4476.