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5 Steps to Improve Your Financial Wellness

January 1, 2024

Each year, January signifies Financial Wellness Month, a reminder to check in on your finances at the start of the year. With potentially weeks or months of increased spending behind us, and tax season right around the corner, now is a great time to start your financial planning for the new year ahead.  

What is Financial Wellness?

Financial wellness is a component of our overall wellness, and it describes how our finances play a role in our physical and mental well-being. Prioritizing your financial wellness can help you feel less stressed, sleep better, and feel more positive overall. The key to financial wellness is financial literacy, so it’s important to take some time this month to seek financial education.  

While it may seem daunting initially, there are lots of small steps you can start taking or planning towards that will help you enhance your financial wellness in the upcoming year, and you don’t have to go it alone! We’ll walk through five steps you can take, so you’ll know exactly how to get started.

5 Steps You Can Take to Improve Your Financial Wellness This January

1. Take inventory.

Track your household income and expenses for a few months to see where your money is really going—you might be surprised. Categorize your spending—for example, you’ll most likely have categories for housing (rent/mortgage), utilities, food, fun and entertainment, and other expenses you know you have to pay each month. You can track this information by writing it down, keeping notes on your phone, using an excel spreadsheet, or whatever other way works best for you and your family, and it’ll be a good starting point for your financial planning.  

Tip: Hold on to your receipts and review them along with your card account statements every month to help identify expenses and categories. This is also a good practice to help identify fraudulent activity early.

As you’re tracking your expenses, take notice of how you’re allocating your monthly funds and see if there are any areas that you might want to cut back spending.  

2. Set SMART Goals.

Now that you have a good idea of your family’s monthly income and expenses, you can start thinking about goals for what you want them to be in the future and creating a plan towards achieving them. The SMART method helps you develop and stick to clear goals. Each SMART goal is specific, measurable, achievable, realistic, and time-set.  

Your goals should always be specific and clearly defined, so you’ll know what you’re working towards and can plan steps to get there. Think about this as an answer to the question of “What do I want to accomplish?”

It’s important to make your goals measurable so you can track your progress. If a goal is too vague or aspirational, you may not know if or when you’ve achieved it.

To make your goals achievable, they should only rely on factors you can control. Take your constraints into account and create goals that make sense for yourself and your family.  

Realistic goals are still aspirational, but they stay within reason. Your goals should give you something to work towards, without setting the bar too high.  

To be time-set, simply tie your goal to a deadline. Giving yourself a deadline can be good motivation to take steps towards completing your goal early and gives you an end in mind to look forward too!  

Your goals might revolve around spending, saving, retirement planning, improving your financial literacy, or a number of other things. Be sure to focus your goals to work for your family and your situation.

3. Create a monthly budget.

From there, you’re ready to develop a monthly household budget! This will be a plan of spending for your family during each month. Using your income and expense tracker and your SMART goals to create an estimate or a target for spending in each category. It’ll also be important to set some money aside for unplanned expenses, like emergencies or unexpected car maintenance.  

To create your budget, start with your monthly income. Then, go down your list of expenses or categories, subtracting each from that income. When you can, allocate money towards tackling debt and creating a savings fund in your budget, but make sure to take care of the more essential expenses (like housing, utilities, and food) first.

4. Chip Away at Your Debts.

Most of us have debts of one kind or another. Debt can be scary, and it often seems easier to push off than deal with, but now that you have some of the other important components of financial planning in place, you should be prepared to start making a plan for paying off your debts.  

First, it’s important that you don’t just ignore your debt… or the debt collectors. It’s better to face the problem head on and answer those phone calls. You might even get more information about your debt and your options.  

To prioritize your debts, consider the consequences of nonpayment. For example, you should focus on child support payments and car loans immediately to avoid legal ramifications and keep your car. Next, you should prioritize student loans and income tax payments to reduce the risk of having that money taken out of your paychecks. Once you’ve dealt with these debts, you can turn your attention towards any credit card debt and older collections.  

Paying at least the minimum payment amount can help you avoid multiple late fees and going to collections, so you should try to account for at least the minimum payments for your debts in your monthly budget.  

5. Start Saving.

After depleting some of that debt, it’s a good idea to set some money aside in a savings fund or account. Often, savings accounts accrue interest on your funds, so your money grows without you even thinking about it!  

This is also a great place to keep your emergency fund! You should aim to have an emergency fund that covers 4-6 months of expenses, if possible, but having any safety net in place is better than having none. This way, if you run into an unusually high bill or other unexpected expense, you’ll be prepared.

Putting It All Together

A new year represents new beginnings and opportunities, and it’s a perfect time to start planning. Talking (and let’s be honest, sometimes even thinking) about your finances can be stressful, but there are always small steps you can start taking to improve your family’s financial future.  

Wishing you luck and success throughout the new year!

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