When it comes to New Year's resolutions, financial resolutions top the list every year. According to USA Today, many Americans are hopeful that our economy is headed for a soft landing and that inflation will begin to cool. Unfortunately, high inflation and economic uncertainty have left many wondering how to improve financial wellness. Financial wellness goes beyond simply having enough money to meet daily expenses; it encompasses a holistic approach to managing finances, including budgeting, saving, investing, and planning for the future. As we navigate economic uncertainties and rising costs, understanding the key strategies to improve financial wellness is essential. This article explores practical tips and actionable steps that can empower you to take control of your financial health, ultimately leading to greater stability and peace of mind for your financial well-being.
Understanding Your Financial Situation Through Education
Being informed is the cornerstone of financial wellness, as it equips individuals with the knowledge needed to navigate financial decisions confidently and avoid costly pitfalls. It's a lot easier to make informed financial decisions to positively influence your financial situation when you have the resources at your fingertips, which is why ProFed offers Money Sense. Money Sense is a free financial wellness program for everyone! Explore the interactive online modules at your own pace over topics like owning a home, financial health, investing in your future, and planning for retirement. School-aged kids can participate in the budgeting, saving, and investing modules. If you're a business, you can request a workshop that allows your employees to learn from ProFed team members in person or online.
Strategies for Managing and Eliminating Debt
Even if you manage to avoid the tempting Black Friday and Cyber Monday sales, you may have other types of debt, such as student loans or medical bills. You may feel weighed down by these debts and want to eliminate them, but how? The higher your credit score, the more options available to you. Learn more about climbing out of debt with ProFed's online playlist - Building Financial Capability.
- Installment Loans: Consider doubling up on payments for auto loans, mortgages, and other types of installment loans. If you can’t afford to double payments, pay any extra amount that you can. Try to prioritize higher-interest loans and the ones your family and friends may have co-signed on.
- Revolving Credit: Get into the habit of paying off your current monthly balance. Choose a pay-off strategy and stick to it. You may pay off smaller balances or higher interest balances first.
- Consolidating Debt: Bills add up, and so can interest. Reduce the interest you owe on your bills by consolidating your debt into a single, low-interest loan. Consolidating high-interest credit cards and other loan balances can help ease your monthly budget. Home equity loans and low-interest personal loans are two ways you can consolidate debt and save money.
Building Savings and Emergency Funds
Consistency is vital in saving money and improving your financial wellness. Consistent saving requires self-discipline, which takes time to develop. If you haven't built emergency savings yet, learn why and how that's important with ProFed's online module - Building Emergency Savings. Listed below are ways to help you save consistently and create an emergency fund.
- Certificates: You can use these to file away a certain portion of your money for a specific period of time. Doing so allows you to earn higher rates than you otherwise might not have if you had used a regular savings account.
- Automated Deposits: If you prefer to have ongoing access to your money but still want to develop personal finance discipline, consider automating your savings deposits. This way, your financial institution withdraws a certain portion of money from your account every month, before you have the chance to spend it.
- Emergency Funds: Build a safety net for unexpected expenses to allow you to pay off things like medical emergencies or car repairs, preventing you from resorting to debt. Begin with a manageable amount, such as $500 or $1000, and gradually increase it as your financial situation improves. Aim for 3-6 months' worth of living expenses to cover essential costs during financial setbacks.
Make a Big Purchase
Sometimes, your goal is to make a large purchase. The cost of this purchase and your available loan options may determine how you prepare your financial plan.
- College: Whether you plan to save for college for yourself or a loved one, 529 plans offer a tax-deferred option. You can use money from this type of account to pay for qualified expenses. Check out more benefits of a 529 plan or other smart ways to plan and save for college with ProFed's online playlist - Investing In Your Future.
- Vehicle: Both brand-new and new-to-you cars depreciate rapidly. Keep that in mind when trying to get an auto loan at a reasonable rate and collecting the funds for a down payment. Before you buy, explore the different ways to buy a vehicle and things to consider with ProFed's online module - Buying A Car.
- Home: Are you planning on buying your first or next home? You need an even bigger down payment than a car, and it's essential you know how to improve your financial wellness to make this big purchase. Start by preparing your finances to qualify for a low-interest mortgage. Check out ProFed's online playlist - Owning A Home. Questions? Reach out to our team of local mortgage experts!
Start a Budget
Whether you make a high-end salary or get by paycheck to paycheck, you need a budget. Budgeting your money today can help set you up for financial success in the future. Learn why you should have a budget, create one, and stick to it with ProFed's online module - Creating A Budget.
- Use a Budget App: When creating your budget, you should consider using an app to track and analyze your expenses. Once your spending is categorized, you can concentrate on your budget. When you see where your money goes every month, deciding where each penny should go becomes much easier. You may also consider budget counseling at ProFed.
- Analyze Spending Habits: When you start your initial budget, we recommend analyzing how much you've spent in the past few months and where you've spent your money. This will tell you how much you pay in relation to your income. Once you know the essential expenses, like bills and your mortgage payment, you can craft a realistic budget to help you accomplish your goals.
- Sign up for Electronic Statements: At ProFed, we make it easy to sign up for eStatements so you can access all your statements, notices, and tax forms in one place. If enrolled in ProFed Digital Banking, you can avoid a $5 paper statement fee by signing up for electronic statements under the Stmts/eDocs tab via your computer or mobile device. Watch this short video to help you go paperless with ProFed today!
Plan for Retirement
It is never too early or too late to start a retirement plan and scope out your financial future. It's an important part of how to improve financial wellness throughout your life. Maxing out your 401(k) at work is a great way to start saving for retirement, but consider the three ideas listed below and a handful of others with ProFed's online playlist - Planning For Retirement.
Partner With ProFed Credit Union to Improve Your Financial Wellness
Financial stability takes time to develop and effort to maintain. However, if you plan well, stay the course, and choose good allies, you can achieve even your most challenging financial goals. At ProFed Credit Union, we provide financial tools and services that help our members achieve their short-term and long-term financial goals. Contact us today to learn more.
