If you had to scrimp to make ends meet in 2022, you certainly were not alone. In fact, according to reporting from CNBC, near-record inflation forced 63% of Americans to live paycheck to paycheck. Luckily, there is some reason to believe inflation may be moderating.
Living paycheck to paycheck can be dangerous, of course, as it leaves little or no money to cover emergency expenses. If you want to know whether you are starting 2023 in a financially healthy place, you should ask yourself a few simple questions.
How much debt do you have?
It is not uncommon for Americans to have debt. If you have too much, though, you might struggle to make even minimum payments. You also might not qualify for loans, credit cards or lines of credit. Therefore, you should try to use less than 30% of your available credit.
Do you have a savings account?
An unexpected emergency can be devastating to a person’s finances. To protect yourself, it is important to have a savings account. Your savings account does not do you much good, of course, if it does not have much money in it. Consequently, you should strive to set aside at least 20% of your monthly income.
What is your credit score?
Federal law gives you the right to have a free copy of your credit score every year, so it makes sense to request and review yours. You also should keep a close eye on your credit score, as it factors into every credit decision most lenders make. If your score is below the mid-700s, you probably have some work to do.
Ultimately, if your financial health is not as good as you want it to be, it might be wise to look into bankruptcy and other debt-relief opportunities.