Are you in good financial health? Here’s what you need to know this holiday season

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What does financial well-being mean to you? Does it just sound like a more sophisticated and healthy term than “personal finance”? Or does financial wellness mean something completely different to you? You might think of financial wellness as a holistic approach to our finances, from getting out of credit card debt to building an emergency fund to saving for retirement. The sum of all these parts makes your money work for you.

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Financial well-being can be crucial during the holiday season. Having a sense of peace about your money can mean you can relax about everything else and truly enjoy the vacation.

Let’s go over a few simple steps that can help you get started on the path to financial wellness, however you choose to define it.

How to become financially well?

Just to define financial well-being, especially in the context of the holiday season, it’s fair to assume that financial well-being means you have enough money to pay for your immediate expenses, cover any emergencies that occur in the course of everyday life. and also have enough money to have the lifestyle you want. Financial wellness also means that you can achieve your current and future goals.

The Consumer Financial Protection Bureau (CFPB) has a financial well-being scorecard spreadsheet that you can fill out to help you determine your financial situation. It covers questions that ask you to assess the following:

  • Manage a major unforeseen expense: Can you cover your monthly expenses worry-free, even if they come in the form of unexpected expenses or unexpected bills?
  • Secure your financial future: Do you have plans to save for the long term, for retirement and other future expenses? In other words, do you have any plans for the future?
  • Money management: Can you cover all the necessary expenses of daily living and still have money for other things you want? Can you choose where to live, drive, eat, and play because you are managing your money well?

Understanding your performance in all of these categories can help you determine how well you are managing your money on a larger scale.

How can financial well-being fit into your life?

What can financial well-being look like in your life, especially this holiday season? Let’s see what this could mean in practice.

Tip 1: Have a stable and reliable income.

When you think of a stable and reliable income, it means that you have money you can count on that will reliably arrive every two weeks, every week, every month. The issue of reliable income can also affect high earners or those who own their own business. If you own your own business but suddenly realize that you aren’t bringing in as much as you normally do during this season, you might want to re-evaluate your business strategy.

Tip 2: Create a well-stocked emergency fund.

What would happen to you if your heater went out in mid-December (in the middle of another winter in North Dakota)? Or what if your car needs to be replaced? Could you pay for it? Experts recommend having an emergency fund totaling between three and six months of spending. However, you might want to save more than that.

If you earn $ 50,000 per year, that means you will save at least $ 12,500 (for three months of spending) or $ 25,000 (for six months of spending). Save $ 50,000 for a really strong emergency fund – the equivalent of a year’s salary.

Tip 3: Have a plan to eliminate debt.

You also want to view your debt in the context of financial well-being.

Making a list of your debts and the amounts you owe gives you a good idea of ​​how you will repay them. (It’s easy to lose track of everything you owe as well as the interest rates on each loan.) You may want to consider setting up an actual plan to pay off the debt, which could include payments. additional each month on your high interest loans. (start with credit cards first!).

Tip 4: Have retirement planning at your fingertips.

It’s no secret that Americans generally don’t save enough for retirement. In a Schroders U.S. Pension Survey, respondents were asked what they thought of their retirement planning so far. Only 27% of non-retired respondents said they were “very much on the right track”. Only 18% of non-retired respondents aged 60 to 67 said the same thing. A good 60% of respondents said they did not have enough savings. Unfortunately, 14% did not know if they had enough savings for retirement.

Whether you choose to supplement your retirement savings with an employer-sponsored 401 (k) plan or put money into an IRA, you should have some form of retirement plan on hand. Keep these numbers in mind to find out how much you should have saved at each age:

  • 30 years old: Save once your annual salary.
  • 40 years old: Save three times your annual salary.
  • 50 years old: Save six times your annual salary.
  • 60 years old: Save eight times your annual salary.
  • 67 years old: Save 10 times your annual salary.

Always remember to pay yourself first and save money in your retirement fund as soon as you get your paycheck. Also make sure you have the right asset allocation for your individual future goals and risk tolerance.

Tip 4: Monitor your credit report and know your score.

Having a good credit score (which is a three-digit number that shows how well you’re paying off your debt) can help you do a number of things. It can help you get a nicer apartment, get approved for a mortgage, or even get a better paying job (yes, some employers check your credit score!).

Financial wellness also involves knowing your credit score and monitoring your credit report, which you can do at annualcreditreport.com. If your score is low, you can take steps to increase it by paying your bills on time, tackling your debts, and making sure you use 30% or less of your available credit, also known as the usage rate. credit. You can also limit your new credit requests, often resulting in a “hard” request that can temporarily affect your credit score.

Tip # 5: Think about budgeting.

Create a budget if you think it will help you during the holiday season and into the future. Calculate how much money you received each month in your household, then add up your fixed expenses, such as mortgage payments and utilities. Then assign all the rest of your money a job, whether it’s entertainment, prescription drugs, or your kid’s basketball shoes.

You can try using a budgeting app to help streamline the process. A budgeting app can help you find out where you are overspending. Budgeting can really go a long way in helping you divide up how much money you will be spending on each person in your family during the holiday season.

Take action for your financial well-being this holiday season

Financial Well-Being in the Context of the Holiday Season: At first glance, you might think you don’t have enough time to get your finances back on track by the end of the year. However, you might be surprised at how quickly you can go through your paychecks, get your spending under control, and figure out how much you can budget.

Treat yourself to a sense of peace as the holidays (and New Year’s) approach by making sure you’re in good financial health. It’s a nice gift to give yourself.


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