United Bank & Trust knows that financial wellness can be just as important as mental or physical wellness, which is why we’re sharing some financial tips with you this National Wellness Month.
Financial wellness is defined as your relationship with money. If you’re struggling in your relationship with money, one of the best ways to improve it is to spend more time understanding how you spend your money and how you can improve its allocation in the future. Here are a few tips to improve your financial wellness.
There are two important questions you must ask yourself as you begin tracking your spending: 1.) where is my money coming from, and 2.) where is it going?
Creating a system that works for you, track your income and expenses to find an answer to these questions. As you’ll quickly find out, your spending will look very different from month to month, but the longer you track your spending, the more you’ll understand your spending throughout the seasons.
There are lots of budgeting plans out there, but the most important part is to pick (or create) the system that works best for you and your lifestyle. If your income fluctuates throughout the year, it’s important to choose a system that helps you save when income is high, therefore leaving money in your reserves for when income is low.
While creating your budget, use your spending tracking skills to estimate when you’ll need to spend more money. Remember to leave aside extra for things like back-to-school season and the holidays. Thinking ahead means less surprises will catch you off guard in the future.
4. Live on less.
If, in your budgeting, you notice that you’re spending more than you’re bringing in, it’s especially important to find places to cut back. When you’re trying to “live on less,” your primary focus is on meeting your essential needs. Cut back on non-essential expenses, and, if possible, find places to save money on your essentials as well.
5. Become debt-free.
Once you’ve learned to track your spending and budget, it’s time to set bigger financial goals. One of the most common next-step goals is to become debt-free. Like with budgeting, the most important part of beginning your debt-free journey is to identify what debt you have and create a plan to tackle it.
Consider using the snowball method, where you make the minimum payments on all your debts, and “attack” the smallest debt, paying more than the minimum payment. Once you’ve paid off the first debt, begin paying that amount on the next-smallest debt until you’ve addressed all your debts.
Similarly, the avalanche method focuses on making the minimum payments on all your debts, while making a large payment on the debt with the highest interest rate. Once that debt is paid off, you can move on to attacking the debt with the next-highest interest rate until all your debts have been paid off.
6. Save for emergencies.
An important part of financial wellness is understanding that, no matter who you are, you’ll always face financially turbulent times. It’s important to set money aside for when these moments happen.
Many experts suggest putting away three months of expenses in your emergency fund. For example, if your family spends $3,000 per month to live comfortably, you should put away at least $9,000 in an emergency fund.
Make saving easier by automatically depositing a portion of your paycheck into your savings account. Because the money is “out of sight, out of mind,” it’ll be easier to resist the temptation to spend it. However, when unforeseen circumstances arise, don’t be afraid to use your emergency fund for its intended purpose!
7. Plan for retirement.
While saving for emergencies, you should also be saving for retirement. The earlier you start, the more your savings will grow prior to your retirement.
Many employers will match all or a portion of your retirement savings; learn more about what your employer offers to maximize your retirement savings. When your employer “matches” your retirement contributions, that means they’re essentially giving you free money for your retirement account. Consider maximizing your employer matching program to grow your retirement savings and capitalize on the opportunity for additional contributions.
8. Learn more about personal finance.
Personal finance can be an overwhelming subject to tackle, but it helps you become a more financially-sound individual. To start, pick a subject that interests you and that is applicable in your personal life. Learn more about it by picking a method you enjoy – reading books and articles, watching videos, or attending seminars. As you learn about the basics, you can expand into more complex topics using the same learning methods.
You can also learn more about personal finance by enrolling in employer-offered financial wellness programs. These programs often allow you to analyze your personal finance with the help of an expert, showing you places for growth and improvement.
Financial wellness can be an overwhelming topic for individuals of any age, but it’s important to prioritize it along with your mental and physical wellness to keep your life balanced. For more information about Financial Education, visit United Bank & Trust’s website.