So how can you get your financial wellness on track? This five-step guide can help you assess your financial health, and then take action to improve it.
1. Pay down debt
If you’re dealing with debt, you’re not alone. Many Americans have some form of debt. This may include student loans, mortgages, car loans, and credit cards. But debt doesn’t have to be alarming. And you can often work low-interest debt such as a home mortgage or federal student loans into a reasonable budget.
Higher-interest revolving debt may cause additional stress if you’re also facing late payment fees. A first step toward improving your financial health is to create a plan to pay down your higher-interest debt. There are multiple strategies for paying off debt, and you’ll want to explore the ones that work best for you. For instance, using a personal loan to consolidate your debt may lower your overall interest rate and simplify your monthly payments.
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2. Budget for short-term financial goals
Budgets do more than track your spending. They could offer a roadmap for what’s financially possible. Start with a solid understanding of where your money goes each month by comparing your income to your spending. You may find you’re spending more than you think on daily coffee runs, monthly subscriptions, or transportation-related expenses.
Look for ways to save, beginning with painless cuts. Maybe you could negotiate a better rate on your car insurance, brew your own coffee, or cancel subscriptions you don’t use. Then you can earmark your savings for short-term goals like planning a vacation or saving for a destination wedding.
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3. Plan for bigger expenses
Your financial life might include large expenses, such as medical procedures, planned leaves of absence from a job, or a home remodel. By preparing for these bigger expenses, you may be able to work them into your budget rather than having them disrupt it.
Think about what big bills might be coming your way and explore ways to fund your needs and your dreams. A personal loan, for example, might help you complete a much-awaited home remodel. A small side gig could provide extra funds that make it easier for a parent to stay home with children. And a health savings account may accelerate your savings for a planned medical procedure. The key is anticipating the expense and creating a proactive strategy for tackling it.
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4. Create an emergency fund
Part of financial wellness is the ability to manage unexpected financial hits. These could include car repairs, sudden home repairs, or dental emergencies. Creating financial safety nets may help ensure that surprise events don’t become financial catastrophes.
For example, an emergency fund can provide cover for smaller emergencies. Various insurance products like major medical, auto, home, and life insurance may offer protection against unexpected financial events.
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5. Save for the future
Once you’ve determined your budget, planned for large expenses, and established safety nets, you’re ready to save for your long-term financial goals. This is a last and critical piece of financial wellness; regular savings over years can help prepare for retirement or pay for your children’s higher education.
Take advantage of employer-sponsored retirement savings, and save enough to earn matching funds, if they’re offered. Accounts such as 401(k) plans for retirement and 529 plans for college savings, allow you to save pre-tax dollars, which also helps accelerate your savings. Be sure to consult with a professional about any investments.
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It’s time to get financially well
There’s no better time than now to start a journey toward financial wellness. If you follow these five steps you may feel more in control of your finances, reduce stress and anxiety, and make real progress toward your financial goals.
Is debt consolidation part of your financial wellness plan? Now that you’ve taken these steps, you can evaluate the potential savings of consolidating your higher-interest debt with this debt consolidation calculator.
