How to Take Charge of Your Financial Health in Uncertain Times
While we can’t control or predict the unexpected, we are here to help you be financially prepared for whatever comes your way.
If you are feeling overwhelmed by your current financial situation, you are not alone. According to MagnifyMoney, just over half of Americans say they live paycheck to paycheck. But by adopting a few important financial habits, you can feel a lot more confident about your soon-to-be-financial-well-being.
Are you financially fit? If you can answer yes to two or more questions, you just might be:
- Do you earn enough income to cover your weekly and monthly expenses?
- Are you debt-free or have a manageable amount of debt?
- Are you able to spend money on things that bring you joy without worrying about paying your bills?
- Do you have at least $500 in emergency savings?
- Are you saving enough to be able to retire at a comfortable age?
- Do you have a great or excellent credit report?
- Do you feel confident about your financial future?
Even if you can answer yes to three or more of the above questions, there is still room to improve your financial well-being. Research has shown that educating yourself regarding healthy financial habits can increase your financial confidence, which will have a direct positive effect on your financial well-being.
Below are eight financial habits to adopt today:
- Live within your means
- Spend wisely
- Free up funds to cover expenses by making cuts to your budget
- Build emergency savings (at least $500!)
- Avoid too much debt
- Manage existing debt
- Save for retirement
- Know when to get help
What is living within your means? It means your total monthly expenses should be lower than your net monthly income. To determine if this is the case for you, record everything you spend over the course of a month. At the end of the month, tally up all your expenses and subtract from your monthly net income. Your monthly expenses should equal less than your net income.
If your expenses are more than your net income, evaluate your debt and see what your discretionary spending is totaling up to. Don’t forget: You should always make at least the minimum monthly payments on all debts. Any additional funds above the minimum should go toward your debt to aggressively reduce it.
Your debt is an emergency that needs your immediate attention. Every day your high-interest debt goes unpaid is costing you money in interest. Once you have managed or paid down your high-interest debt, you can take funds you allocated to paying down debt to an emergency fund. Remember that $500 emergency fund mentioned earlier?
Financial emergencies can come at the least expected and most inconvenient times. Don’t get discouraged if you can’t save a lot immediately.
Be prepared to save and keep those savings for a rainy day:
- Make sure your savings account is not easy to access but easy to retrieve within 24 hours.
- Set a savings goal. Start with $500 as the first baby step towards your emergency fund and aim to build savings that would cover three months of your living expenses. Anything else you are saving for, such as a vacation or a large appliance, will be in addition to this.
- Separate your emergency savings account from other accounts you pay bills from.
- Make savings easy by setting up automatic transfers to a designated account on the day you get paid, to ensure you pay yourself first.
- Earn dividends on the funds you save with a high APY (Annual Percentage Yield) savings account.
Sometimes life can kick us while we are still down no matter how much effort we put into managing our finances. If this is true in your situation, the most important thing you can do is get help when you need it. Outside of friends and family, there are other resources available for you:
- The representative at your current financial institution. If they don’t know the answer, they most likely will have the ability to point you in the right direction.
- The Financial Counseling Association of America. This is a nonprofit organization dedicated to helping people who are struggling financially.
- Look for a credit counselor who is certified by the National Foundation of Credit Counseling
- If you are struggling with debt and you think you may need legal assistance, contact a reputable attorney specializing in debt settlement as soon as possible.
- Service Credit Union has partnered with GreenPath Financial Wellness to provide free one-on-one financial counseling and debt management services to members.
- Service Credit Union members can also access the MX Money Management tool, which helps track spending and set a budget, via online banking. They also have free access to the Fin-Life app, which coaches users through the most important themes in financial wellness in just a few minutes a week.
Learn to take charge of your financial decisions before your financial decisions take charge of you.