Your Financial Future Needs Your Attention Today
Did you know that 38 percent of employees live paycheck to paycheck? And that 70 percent are saving less for retirement than they think they should?
That's according to a study done by Willis Towers Watson, and it highlights some disturbing findings when it comes to the average person's ability to save.
When you think about your health, money probably doesn't come to mind. But it should! While mental and physical health are both important, financial health needs to be catered to as well, as it can significantly impact your stress level and overall well-being.
What Exactly Is Financial Health?
Financial health refers to the stability of personal finances. A growing cash balance, steady flow of income, and hearty returns on investments are all taken into account. Good financial health makes way for a stable future, at least in monetary terms.
So, why is financial health important? Financial health, physical health, and mental health are all connected. The American Psychological Association reports that 72 percent of adults feel stressed about money, whether that be worrying about debt or struggling to make rent.
According to VeryWellMind.com, financial stress can lead to:
- Sleep problems
- Heart disease
- Unhealthy coping behaviors, like overeating or alcohol abuse
It's time for a financial health checkup!
So, what can you do to improve your financial health, and thus, your overall health? Here are some helpful tips you can put to use today.
1. Crunch the Numbers
You can't budget without understanding the numbers, so the first step in your financial health check is to crunch the numbers. List out all of your monthly bills, starting with cost-of-living expenses, like food, housing, health care, and transportation. Then, list out all of your extra expenses, which may include things like date nights, cable bills, and gym memberships.
By having a thorough understanding of where your money is going, you can start to eliminate unnecessary costs or find more affordable alternatives.
You may even be able to adjust your cost-of-living expenses. For example, if you're a homeowner, it may be a great time to refinance. That simple move could save you thousands!
Many people have trouble changing their spending habits, as they don't want their lifestyle to change. Focus on adjusting your mindset. It's not about "going without" or making huge sacrifices; it's more about setting yourself up for financial security. Your future self will thank you for it!
2. Review Your Health Coverage
To help minimize surprise expenses that can be very costly, ensure you and all members of your family have adequate health insurance. Poor or a lack of coverage can mean hefty hospital bills should an accident happen, which may push you into debt.
As with any major expense, shop around before making any decisions. Get quotes from competing insurance providers to obtain the best rate for the most coverage. While you can't negotiate your insurance rate, it's important not to take the first plan you find. There may be better options out there for the size of your family and any pre-existing medical conditions you have.
3. Set Up an Emergency Fund
An emergency fund is different from your savings.
Aim to have six months of expenses stored up in your emergency fund.
After that, you can choose to keep adding to the fund or can simply start redirecting that earmarked money into your savings account instead.
It's important to keep your savings separate from your emergency fund because your savings is what will help you in the long run, especially if you don't have a retirement account set up yet. If your car suddenly breaks down and requires $3,000 to fix, you're not forced to dip into your hard-earned savings.
Having this emergency stash of cash helps alleviate the financial strain of unexpected expenses, and can significantly assist if you're laid off from work. You want to avoid tapping into your savings unless absolutely necessary.
4. Create Your New Spending Plan
Now that you know where your money is going, have explored cheaper options for your extra expenses, and have a separate emergency fund set up, it's time to create a budget - and then stick to that budget!
Here's where it can get tricky, as many find their budget doesn't leave them with a ton of extra money at the end of the month. Your budget should factor in money for fun. Don't completely deprive yourself, as it will become much more difficult to stay motivated. Find an affordable way to treat yourself, whether that be an end-of-month movie outing or a celebratory dinner with drinks for meeting your monthly goals.
5. Consider Investing
Consider investing any extra money you have, but only if you thoroughly understand the investment and all associated risks.
Investing can offer massive ROIs, but can also lead to some pretty heavy losses. For that reason, it's important to wait to invest until you have extra money to do so. By pulling money out of your savings to invest, you're taking quite a big risk. If it doesn't pan out, your finances could take years to recover.
Don't Just Live - Thrive!
Follow these tips to get on the road to financial well-being today. The small changes you make and the ways you save money will add up over time. As your savings and emergency funds grow, you'll start to feel less stressed about money.
The good money habits you establish now will aid you long into the future, helping you buy your dream home or enjoy retirement to the fullest!