Taking care of your finances is an important
step in achieving overall personal wellness and planning for the
future. But how do you make beneficial financial choices when you don’t know
where to start? The good news is you don’t need to be a certified CPA to
achieve financial wellness.
To help our readers, we asked our Chief
Financial Officer, Chief Risk Officer and Treasurer, Mike Perrino for tips on
how individuals can prioritize their personal finances and set themselves up
for financial success.
Make a Budget and Stick to It
One of the first steps on the road to
financial wellness is creating a budget for yourself and your household.
To create an accurate budget, monitor your spending for a set period of time
and track every single expense. Going through this exercise will create greater
financial awareness, as it will allow you to not only understand how much money
you and your family need to cover necessary expenses but also highlight opportunities
for improvement.
Once you have a better grasp on your spending
habits, you’ll be able to more effectively allocate resources for monthly
expenses such as a mortgage, rent, car payments, groceries,
and let’s not forget leisure time with friends and family!
“Like a well-built foundation that enables a
well-built home to stand the test of time, a well-planned budget can serve as
the foundation to your long-term financial well-being!”
Focus on Paying Off Debts
Minimizing your debt is one of the best moves
you can make for improving your personal finances. Debts incur interest, so the
longer it takes you to pay them off the more you pay in the long run.
“One of the key aspects of maintaining your
financial well-being is the ability to track your progress and celebrate your
success along the way. For example, when considering the high interest carrying
costs associated with credit cards, actively paying down this type of expensive
debt is like paying yourself when you consider the interest saved. And while it
may seem like a small win, doing so is certainly a reason to celebrate!”
Thankfully, there are a handful of strategies
you can choose from to pay off your debts more quickly and efficiently.
●
Debt Snowball: This is where you pay the
minimum on all debts but place a primary focus on paying off the smallest first.
Once you achieve this initial pay-off, take the amount you were paying on the
first and start allocating it to the next largest outstanding debt. Continue with
this process until you have paid off all debts.
●
Debt Avalanche: Here, the focus is on paying
off the debt with the highest interest rate first while still paying the
minimum on all other debts. After the first debt is paid off, continue with the
next highest rate and so on.
●
Seek Help: If you are feeling overwhelmed by
your debt and find yourself not making much progress on paying it down, it may
be time to seek professional help. You may find it beneficial to reach out to a
credit counseling service or nonprofit agency to inquire about how to create a
debt management plan that will help you get back on the road to financial
wellness.
Plan for the Future
It is never too soon to start planning for
retirement. Even if your glory days seem like a distant dream, the truth is,
the sooner you begin putting money away, the more enjoyable those post-career
days will be.
Start planning by first identifying your
retirement needs - you will need approximately 70 to 90 percent of your
pre-retirement income to maintain your standard of living once you stop
working.
“Start by understanding what a pension plan
may be providing you at retirement and then supplement this with contributions
to your employer’s 401(k) plan.”
Absent a pension plan, you will need to understand
if there is an employer contribution element to your 401(k) plan. Many plans
have minimum employee contribution percentage levels to qualify for employer matching.
You will want to strive to meet the minimum levels to realize the greatest
value offered by your plan.
Once you start putting money away, be disciplined
in your approach and avoid any thought of using this money before retirement.
Borrowing from your retirement fund is a risky choice that can quickly turn
into a dangerous habit.
“It’s also a great idea to set up an automatic
increase to align with your annual raise. This provides for retirement savings
growth while diluting the impact on your personal or family budget plan.”
It has been said that failing to plan is the
equivalent of planning to fail. Establishing sound financial planning early in
life can have a profound impact on your personal freedom to make the choices
that allow you to enjoy life to the fullest.
“The compounding effect of investing at an
early age creates a wealth of options as life progresses. Be it the ability spending
more time with family via the purchase of a vacation home, or perhaps experiencing
the world with a loved one through travel, or having the option to retire
early, good plans afford us the opportunity to dream bigger!”
Still not sure where to start? Click on the
button below to learn more about effectively creating and managing a personal
budget.
