How confident are you about your finances? To start discovering areas where you could use some improvement, ask yourself how you stack up against these principles of good money management.

1. Spend less so you can save more

Even small cuts in spending can add up to big advantages in the long run. If you spend $10 a week less on coffeehouse lattes, you'll cut expenses by about $520 a year. If you invest that amount each year in your retirement savings plan, an IRA or another tax-deferred account, and you earn 6% annually on your investment, after 20 years you'll have a pot of more than $20,000.

2. Look closely at your use of credit

The average household carried total credit card debt of $7,027 from month to month as of September 2020, according to NerdWallet. Carrying a balance from month to month increases the cost of purchases (thanks to interest charges) and perpetuates a cycle of debt.

3. Keep a cash cushion for emergencies

You should always have a ready source of cash to dip into in the event of an emergency, such as a job loss or major home repair. Aim to have enough cash on hand to cover at least three to six months of basic living expenses. Keep the reserve in a safe and easy-access account, such as a money market fund.

4. Diversify your investments

When you have too big a portion of your retirement savings in too few investments, you expose these savings to too much risk. Diversification means spreading your money around a varied mix of investments, allowing you to balance out the risk of loss on any single investment or a small number of them.

5. Keep on top of insurance needs

Always be sure to have adequate types and levels of insurance coverage. Take advantage of employer-sponsored programs like long-term disability, long-term care and umbrella insurance. These are typically competitive programs that have been negotiated for group discounts. Revisit your insurance needs at least yearly or whenever you have a major life change, like getting married or divorced or adding a child to your household.

6. Take estate planning seriously

All adults, regardless of age, marital status or net worth, need to have at least basic estate planning documents in place. There's more to an estate plan than just a will. Among the other documents you need are health care and financial powers of attorney, which appoint someone to make critical decisions on your behalf in the event you become incapacitated, and a living will, which states whether you wish to accept or refuse life-sustaining treatment in the event you become terminally ill. Once you have an estate plan set up, review it at least annually and whenever there are changes in tax law, your family situation or your net worth.

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This material is provided solely for educational purposes; it does not take into account any specific individual facts and circumstances. It is not intended, and should not be relied upon, as tax, accounting, or legal advice.