Financial planning can be a difficult—even overwhelming—task. Loans, debt, credit, savings: all of these finance concepts become confusing fast when you’re not sure how to manage them all at the same time. It’s true: most of us aren’t finance experts, but the good news is you don’t have to be in order to manage your money smartly. Many adults aren’t taking full advantage of their savings, and yet, financial wellness is a major component to happiness and security. Luckily, there is tried-and-true advice that can help you achieve a financial wellness plan that works best for your income and lifestyle.
What is Financial Wellness?You’ve heard about wellness when it comes to your health, but you may not be as familiar with wellness when it comes to your finances. Still, it’s an incredibly important factor in your overall well-being. Financial wellness can mean different things to different people, but generally, it refers to two characteristics: security and freedom of choice. Security means you can cover your day-to-day expenses without worry, and have enough saved to cover emergency expenses or unanticipated bills. Freedom of choice means you can, within reason, choose where you want to live and what you want to eat and wear. It also means that you’re on track toward future financial goals, such as retirement. Most everyone could benefit from advice on how to achieve a level of security and freedom that would make them feel financially “well.” Read on for our top savings tips, backed by experts and applicable to most everyone who wants to improve how they manage their money.
Top Savings Tips for Achieving Financial WellnessThe following savings tips should help you keep track of your finances, invest in the right areas, and ultimately improve your overall financial wellness. 1. Create a financial calendar If you’re not sure where to start when it comes to developing a financial plan, start with what you know: Create a list of all of your bills, debts, and other current expenses. Then, plot these along a calendar so you can see on a monthly basis where your money is going. (Your bank may also be helpful in providing snapshots of what you’re spending money on; you can check online if they have a tool for this.) Your calendar should also serve as a reminder for when payments are due, such as for electricity or loans. Consider this calendar a working draft: be prepared to adjust it when you complete step two. 2. Build a personal budget Perhaps the most important step in financial planning is creating a budget. Without a budget guiding your spending decisions, you may be making less than ideal choices that are impacting your finances both in the short- and long-term. Follow these steps to budget correctly:
- Determine your after-tax income. If your paycheck automatically takes out money for savings or for retirement, add these back in to determine your true income.
- Select a budgeting plan based on your financial goals. Is your main goal to pay off your credit card debt? Or to build up your emergency savings fund? In any case, there are several budgeting plans available, and only you know what may work best for your needs.Many experts suggest the 50/30/20 plan, which involves spending money as follows:- 50%: necessities, such as rent and groceries – 30%: lifestyle, such as entertainment and going out – 20%: savings and debt payments
- Revise your financial calendar to incorporate your new budgeting plan.
- Track your progress as frequently as possible (see step 3).
- Continue to revisit your budgeting plan as needed.