Now that Valentine’s Day and the Winter Olympics have come and gone, we still get to celebrate Black History Month a bit longer! How delightful – the change of pace, right? When you take a moment to look back on the past couple of years, does time seem like a blur?
Whether you are clear on how you made it through, take a deep breath of self-love and gratitude. Yes, your health is true wealth! So kick financial stress to the curb, for good. Speaking of health and wealth…
How does your financial health look as we are well into 2022? Chat with Humanity Wealth Advisors to help make sound financial decisions moving forward!
If you’re like most, it looks a lot like the month before. In your mind, you may want to change, but your situation may never improve until your behaviors change.
Before you take that person and start changing everything relating to your money, remember this: A realistic plan for good financial health is the one you can stick to. If you don’t see yourself sticking with something a year from now, then don’t bother starting with it today.
Here’s a better idea: Focus and commit to a few sustainable changes.
As a financial advisor who happens to offer affordable financial planning in the Bay Area, here are my top 7 ways to improve your financial health now and the years beyond.
1. Automate Your Savings (and Investing!)
Unless you’re a finance nerd like me, you probably don’t want to be thinking about your money all the time. The more you can automate, the better, especially when discussing savings.
Setting up automatic transfers from your checking to your savings and investment accounts will put your finances on autopilot. If you schedule it to happen right after your paycheck hits, chances are you probably won’t even miss it.
Start small and slowly increase it when you can. It’s not a drastic change, but this is one of the most powerful strategies anybody can use for creating long-term wealth. A little will go a long way.
2. Build an Emergency Fund
Life happens. When it does, don’t be forced to dip into retirement savings or put unplanned expenses on a credit card – that will only make matters worse.
Having a cash reserve of at least 3-6 months’ worth of living expenses in the bank is a critical component of a healthy financial life. It will also contribute significantly to your peace of mind.
Again, start small (put it on autopilot!) and let it accumulate naturally. If you need $10,000 in your emergency fund, put $100 a week in until you reach that figure. If that’s too much, try $100 a month.
3. Pay Off Consumer Debt
High-interest rate debt is crippling, financially and mentally. If you’re one of the millions of Americans underwater in credit card debt, you know the feeling.
There’s no one right way to pay it off, and there’s no quick fix. Two popular methods are the snowball method (start small, gain momentum) and – my personal favorite – the avalanche method (begin with the highest interest debt first).
Making your last debt payment is an incredible feeling: You’re in control again! Studies show that individuals overwhelmed by debt are more inclined to suffer from various mental health challenges like stress and anxiety.
4. Understand Intentional Spending
Don’t bother starting something you can’t stick to long-term. For 98% of the population, that includes a budget. No, I’m not saying that you can continue to spend your money on whatever you want, whenever you want.
In the 21st century, overspending is far too easy – it can happen with the tap of a card or smartphone. By examining unnecessary expenses and eliminating them, you can lower your credit card bills by hundreds of dollars every month, resulting in thousands saved every year.
Now, think about what you want to spend your money on; this is known as intentional spending. Instead of cutting out all expenses (like a strict budget may have you do), only spend on what matters to you: shoes, coffee, good food, nice clothes, a car – the point is, it’s up to you.
5. Calculate Your Net Worth
Figure out the difference between what you own (assets) and what you owe (liabilities). The resulting figure is your net worth.
Calculating your net worth one time is helpful, but you may want to begin calculating it annually. Your net worth will fluctuate over time, hopefully trending up and to the right.
Doing the math at least once per year will help you stay on track, allow you to celebrate your successes, and shore up any areas in need of improvement. Of course, a financial advisor can help you get started if it feels too intimidating at present.
6. Fun Money
Here’s another opportunity to automate your savings!
Planning for significant expenses in advance is the surest way of making sure they happen. Vacations, fancy date nights, a new car, or whatever sounds fun to you, have some money set aside to enjoy them on your terms.
You may decide to open a separate savings account for your “Play” money and direct a specific portion of it to every paycheck.
On a related note, I’ve seen people open separate savings accounts for a home, boat, RV, wedding; you name it – that’s the beauty of online banking. If saving with your special person, this can create more trust and intimacy.
7. Increase Income
Most people I know don’t have an unlimited amount of money – we all could use a little more.
If you don’t want to actively seek out ways to create additional income, at least have it floating around in the back of your mind. You may be more prone to discovering opportunities at work or finding out you can monetize a hobby.
The world is full of possibilities to make more money. Find a way to provide value, and the dollars will follow. What do you love to do? Is there an opportunity to profit from your talents and gifts?
Similar to your physical health, developing good habits is the key to pursuing good financial health. Good habits make time your ally; bad habits make time your enemy.
By adopting even just a few of the examples listed above, you can potentially make some serious strides in your finances. Keep them up one day at a time, and you may be amazed at your results down the road.
If you want to supercharge your results, schedule an appointment with us today and let us demonstrate the value of financial planning – it’s never too early or too late to start. The ultimate way to take hold of personal finance long-term is to change your behaviors.
Ready to make 2022 the year you finally take control of your money, for good? Talk with an Independent Financial Advisor Newark, CA, based.
Investing involves risk, including possible loss of principal.
Humanity Wealth Advisors and LPL Financial do not provide legal advice or tax services. Please consult your legal advisor or tax advisor regarding your specific situation.