Are you comfortably paying all your bills?
Let’s say your first mortgage and second mortgage are both manageable. You are slowly paying off your home equity line of credit. Both car payments are about the same as what your friends pay. You’re not late on any of your credit card bills and your job is secure for now. Compared to the doom and gloom you hear on the news, your financial situation sounds pretty good. So how do you really know if your personal finances are in order?
One problem we all tend to have is “relativity syndrome”: We view our personal situation relative to those around us. In other words, we figure that as long as we’re average or slightly above average in relation to our environment, then we must be doing okay. But what if those around you are living paycheck to paycheck? Or are deeply in debt?
Ask yourself these four questions to gauge whether your finances truly are in order:
1. If your employer messes up your next paycheck and you don’t receive it for another month, will you still be able to pay your bills on time?
2. Do you have fewer debts than you did a year ago?
3. Are you regularly contributing to a savings account of some type outside of your retirement account?
4. Could you pay off all of your credit card debt and car loans over the next 12 months if you had to?
If you answered “no” to at least two of the above questions, then now would be a great time to step back and consider a new budget.
This article originally appeared on TheMoneyProfessors.com and is reprinted by permission from TheMoneyProfessors.com, © 2015. All rights reserved.