With student debt on the rise, economic trouble looming, and a competitive job market, it can be easy to get discouraged about your financial situation. But here’s some good news. While financial wellness may seem complicated, it really boils down to a few good habits that can make the difference between going broke or building up your net worth each month.
What is financial wellness? Let’s start with a simple financial wellness definition:
- Financial wellness is an individual’s overall financial health, including features like their debt, income, savings, and net worth.
Just as with achieving a balanced diet or maintaining a regular exercise regimen, getting your personal finances in order is often easier said than done. However, by sitting down and making a plan to conquer your hurdles in your way, financial wellness can be achieved. Take a look at these 12 financial wellness tips that can get you on the road to improved wealth.
- Start with your savings
- Carefully manage debt
- Start growing your wealth
- Cover your bases
- Key takeaways
Start with your savings
With all of life’s expenses and debt to pay down it can be hard to get serious about saving. Nonetheless, it’s an important place to start focusing on your financial wellness.
1. Keep an eye on your spending
The first step to growing your money is knowing your money. For instance, you might not be aware that you’re spending hundreds of dollars a month on clothes or coffee; seeing that information laid out clearly can help you cut back where you need to.
Keeping track of spending can be as easy as reviewing your credit card and bank statements each month. It can also be even easier than that: apps like Mint allow you to keep track of your spending, what categories of expense you often incur, and how much goes to each category.
Just knowing where your money is going can often be a deterrent to overspending, and a boost to your financial fitness. It’s possible that just by seeing that you spent $432 one month dining out with your friends, or that you bought coffee 17 times, you’ll change your spending habits for the better.
2. Build a budget and stick to it
Many people really only have a couple of problem areas when it comes to overspending. Maybe it’s shopping, maybe it’s electronics. Once you know how much you typically spend on different categories, try creating a budget 15-25% lower. It’s a good idea to start with baby steps when dialing back spending; if you try to cut too hard and too fast, you might get frustrated and be unable to really stick to it.
The Mint app is specifically built to help you analyze your spending and then create a comprehensive and totally sustainable budget. By making a spending plan for each month and sticking to it, you can plan your savings goals knowing roughly how long it’ll take to get there, and where you can cut back if you need to—as well as where you can spend a little extra, if you have the wiggle room.
- Note: If it’s your first time building a budget, be sure to read our guide to budgeting here.
3. Consider where you stash extra cash
If you have tons of money stowed away in a box under your bed, or maybe even just piling up in your checking account after each paycheck, you might not be getting the returns on your money that you could be. It’s a good idea to think about better places to keep that cash.
One place to start is with a savings account. However, you should note that not all savings accounts are equal. The average US savings account only pays about 0.5% interest. With the inflation rate hovering around 2-3%, you could actually be losing purchasing power each year.
To avoid this, you have a few options:
- Find a high-yield savings account, which can sometimes offer rates as high as 2% or 3%.
- Use a money market fund, which may also have rates higher than inflation.
- Try out investing accounts (more on that below) that will pay you a more substantial rate of return.
4. Think about a side hustle
One way to boost your savings, or even kickstart an emergency fund (more on that further down), is to work a side hustle in addition to your regular day job. Apps like Uber and Lyft make it easy to use your car to gain a little extra cash on the side while driving around town. There are also apps for dog walking, food delivery, and tons of other odd jobs—earning money on the side is easier than ever.
Having a side gig can even be a fun and rewarding way to boost financial fitness, especially if you monetize a hobby like selling crafts online, or even starting a monetized YouTube channel. Get creative with your skillset and see if you can use your part-time gig to boost your savings.
Carefully manage debt
For many Americans, debt is just another fact of life. By carefully and cleverly managing debt, however, you can ensure your financial wellness doesn’t suffer.
5. Make a repayment game plan
The average American carries almost $6,000 in credit card debt, and many Americans have thousands more in student loans. Using a loan calculator with an amortization schedule, you can determine that by making the minimum payment on your debt, it can take years and thousands of dollars in extra finance charges before you’re in the clear.
Instead of just paying the minimum and hoping for the best, it’s important to make a plan. There are concrete steps to get out of debt fast that you can make today, like making a budget and spending plan, setting up an autopay (that’s higher than the minimum!), and devoting a portion of each paycheck to debt repayment.
You can use the Mint app to analyze your spending, find places where you can comfortably cut back, then allocate those funds to paying off your debts. The app can also show you your current balances, so you have a bird’s eye view of your debts as well as your savings, checking, and investments.
6. Keep track of your credit score
Your credit score is essentially a measure of your trustworthiness as a borrower. It often determines the interest rate lenders will charge on your credit cards, mortgage, student loan, or car loan. So, it’s important that you know what your credit score is, and do your best to keep it in tip-top shape.
If your credit isn’t great, don’t worry. There are steps you can take to manage your credit and improve it over time. The simplest way to help your credit improve is to make consistent, on-time payments on any debt you may have. It can take a while to improve your credit, so it’s important to be patient. In the long-run, though, your financial wellness will benefit from better credit, as the rates you get on loans will be more favorable.
7. See where you can cut extra credit costs
Budgeting isn’t just about cutting down on your spending—it can also help to opt for financing plans with better terms. For instance, if your credit card has a high-interest rate, punishing late fees, and an annual fee on top of that, you might be spending more than you need to. Plus, many cards offer perks like cash back on restaurants, so you might also be leaving money on the table.
Try shopping for a credit card that has better terms than the one you’re currently using. Some cards offer low APR, more forgiving late fees, and no annual fee. Shop around and find the one with terms and perks that suit your lifestyle best; just be sure to read the fine print so you don’t wind up spending more by accident.
8. Consolidate for a better deal
Lastly, if you’re feeling in over your head with debt on multiple credit cards, it might be a good idea to consolidate your debt payments with a personal loan. In some cases, personal loans have lower interest rates than credit cards, meaning that if you bundle all your debt in a personal loan, you may end up paying a lower total APR than you would have on your card.
Be sure to carefully review your finances, as well as the fine print and terms associated with any personal loans, before applying.
Start growing your wealth
Once you’ve got enough saved up and your debt under control, it’s a good idea to look toward growing your net worth—the ultimate goal of strong financial fitness.
9. Contribute to an IRA or 401k
If your job offers a 401k, it’s a great idea to invest a portion of your monthly income into it. Some 401ks are even employer-matched, meaning that your employer will kick in a little extra cash up to a point when you contribute. That’s a great deal, and you should definitely consider increasing your contributions to meet the match where possible.
If you don’t have a full-time job with benefits, you still have options. IRAs are retirement accounts that you can open by yourself, no employer needed. Banks, credit unions, and investment companies often allow you to open an IRA inexpensively, so you have tons of options when shopping around.
In either case, contributing to a retirement account can help grow your wealth long-term. So, no matter how early in your career you may be, it’s a good idea to invest in your retirement. The power of compound interest can then work in your favor.
10. Get a jump start on investing
In addition to saving for retirement, it’s a great idea to start investing. Investing can seem daunting at first, but there are plenty of ways to get started that can help you learn to become a more confident investor while growing your net worth. If you’re just getting started investing, try one of these options:
- Use a robo advisor that can automatically allocate your funds for you
- Consider investing in mutual funds that track a market index, like the S&P 500
- Follow one stock for a while before investing, do research, and try your hand at the stock market
- Work with a professional financial advisor who can help you allocate your wealth in a way that works for you
Cover your bases
Lastly, it’s important to prepare in case of trouble.
11. Prioritize an emergency fund
No matter your financial circumstances, it’s important to build up emergency savings. Emergency savings is pretty much exactly what it sounds like: a healthy amount of cash you have on-hand in case some large and unforeseen expense comes up, like a medical bill, car repair, or even a layoff.
Experts often recommend you put away about 3 to 6 months’ worth of income when building an emergency fund. This may take a while to build up, but it’s well worth it in the long run. Without an emergency savings account, you could be one busted car transmission or a job layoff away from some seriously hot water.
12. Protect yourself with insurance
It’s a good idea to plan ahead with insurance as well. Even younger people should be sure to invest in quality health insurance, car insurance, and renter’s insurance to prepare for a rainy day. Finding the right insurance policy can take time and effort, but having it is incredibly important; even with an emergency fund, a totaled car or serious illness could knock you on your back for a while.
Keeping your finances healthy and prioritizing your financial wellness is one of the most important things that you can do to secure a happy and comfortable future. In general, remember these general rules of thumb:
- Monitor your spending and budget wisely so you can save.
- Keep debt under control and negotiate favorable terms for repayment.
- Think ahead to your future and to retirement by investing.
- Always plan for a rainy day by maintaining emergency savings as well as insurance.
If you’re curious about where you fall on the financial wellness spectrum, take this quiz from ConsumerFinance.gov to find out. And, if you need a little help along your journey, the Mint app makes planning your finances easy. Download it today to jump-start your journey to financial wellness.