debt

Take Bankrate's Money Makeover quiz: Get Greg McBride's take on your personal finances

Do you have control over your personal finances? | Martin Barraud/OJO Images/Getty Images

Greg McBride, CFA, Bankrate chief financial analyst

First Question

1. How much do you have in an emergency fund?

You need to set up an emergency fund. Then you can depend less on a credit card to cover unexpected expenses. You can set this up easily by diverting a portion of your paycheck directly into savings automatically. Just $50 a month will help you build it up, and you won't miss the money. Remember: Don't dip into it unless you're having a true emergency.

RATE SEARCH: Find a high-yield savings account today.
You've gotten started, but you need to beef up that savings cushion. Set up or increase direct deposit, and divert any raises, bonuses or windfalls into your account.

RATE SEARCH: Find a high-yield savings account today.
Good job! If you have 3 months' worth of expenses saved up, continue to build your emergency fund until it has 6 months' worth. If you have 6 months' worth in reserve, you can focus your extra cash on other priorities, such as saving for retirement.

RATE SEARCH: Find a high-yield savings account today.
Next Question

2. How much credit card debt do you have?

Why borrow money at high rates from credit card companies? Do everything you can to pay off your credit cards since it's impossible to get that kind of return from safe investments.

RATE SEARCH: Thinking of consolidating your debts? Check out personal loan rates at Bankrate.com.
Do what you need to do to wipe that credit card debt out once and for all. Refrain from borrowing more money to do it.

RATE SEARCH: Thinking of consolidating your debts? Check out personal loan rates at Bankrate.com
Excellent! You're using credit cards wisely.

RATE SEARCH: Thinking of consolidating your debts? Check out personal loan rates at Bankrate.com
Next Question

3. How much do you save for retirement?

It's tough to save for retirement if your earnings are barely covering your expenses. But if you don't start saving now, you'll be scraping by during retirement, too. Contribute at least enough to maximize any employer match. If you don't have a retirement plan at work, try putting in 3% of your income automatically in an IRA. Chances are you won't miss the money, and it will slowly build up. As your income goes up, increase your contribution accordingly.
You're off to a good start. Ideally, you want to save 15% of your income for retirement. As your income increases, try increasing your contribution so that you can maximize your contributions. Currently, the IRS permits a maximum contribution of $18,000 a year in a 401(k), $24,000 if you're 50 or older. IRA contribution limits are $5,500, and $6,500 if you're 50 or older.
Great job! As your income rises, try increasing your contribution so that you can maximize your contributions. Currently, the IRS permits a maximum contribution of $18,000 a year in a 401(k), $24,000 if you're 50 or older. IRA contribution limits are $5,500, and $6,500 if you're 50 or older.
Next Question

4. Do you budget and track your monthly expenses?

Do you want your finances to rule over you, or do you want to rule over your finances? You need to get a better handle on your money. Keeping a budget is the best way to track your expenses. Make sure that your priority expenses include contributions to an emergency fund and a retirement fund.
Keeping a budget is the best way to track your expenses. Make sure that your priority expenses include contributions to an emergency fund and a retirement fund.
Great job! Keeping a budget is the best way to track your expenses. Use that extra cash every month to increase contributions to your emergency fund and your retirement fund.
Last Question

5. How is your credit?

The 2 biggest factors in your credit score are paying bills on time and having a track record of keeping your debts modest and paying them back. It's important to check your credit report regularly to make sure there aren't errors and to keep identity thieves away. You can do this for free at myBankrate, and at AnnualCreditReport.com.
It's important to check your credit report regularly to make sure there aren't errors and to keep identity thieves away. You can do this for free at myBankrate, and at AnnualCreditReport.com.
Fantastic! You are taking steps to minimize the chances of being victimized by errors or identity theft. Be sure to keep an eye on your credit reports regularly. You can do this for free at myBankrate, and at AnnualCreditReport.com.

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
advertisement
5 ways to grow an emergency fund
advertisement

Connect with us