According to the 2016 Planning and Progress Study, 67% of people surveyed said that their financial anxiety was impacting their physical health. That’s scary!
As a fee-only financial planner, I work to help people improve their financial fitness – similar to how athletic coaches work to help people improve their physical fitness. This new study shows that financial coaching can also help with your health. What a nice bonus benefit! If you would like to improve your health, by improving your finances, just reach out to discuss options. In the meantime, here are a few tips for do-it-yourself people to get started…
1. Build a starter emergency fund. You need something saved as quickly as possible to help cover unexpected expenses that come up (they always do, don’t they?). It doesn’t need to be a lot, but at least a few hundred dollars. If you build up just $400 you are doing better than almost half of Americans!
2. Start working on your budget. Good budgeting takes time, so don’t get frustrated if it takes a few months. We’ve seen that people often take at least three months before their budget becomes fairly accurate. Just fine-tune it each month and continue to make progress.
3. Knock out your debt. Once you have a budget, which is essentially a plan for your money, you can allocate money toward paying off any consumer debt you have – especially credit cards. The average credit card interest rate in 2016 runs right around 15%. Paying interest on purchased consumer goods is one of the largest hindrances to wealth-building, so knock that out as quickly as you can.
4. Have a fully-funded emergency fund. The starter emergency fund was just to help you get started. Once you’re making progress and have knocked out consumer debt you should work on your full emergency fund. Financial experts agree that between three and six months’ of expenses is ideal.
5. Think about your future. By this point, you’ve already made a lot of progress! Great job! Before moving on to investing for your future you should go through easy exercises to help clarify what goals you are actually working toward.
6. Track your net worth. Net worth is going to be the key metric to track in regards to your financial fitness level. Lowering debt increases your net worth. Higher savings increases your net worth. Investment growth increases your net worth. Starting to see the trend? Positive financial progress will improve your net worth so start tracking this metric.
7. Start investing. Make sure you first understand what stocks and bonds are. Too many people start investing without understanding what they are buying into. Then get familiar with diversification, which is a key investment component. After you understand the basics, as financial coaches we’ve seen the best success – so we recommend – consistent investing over time. So many people don’t understand the power of consistent investing, but it really is amazing and a great way to build wealth.
These seven tips should help you get started on your financial fitness plan – and therefore also help improve physical health for almost seven out of ten people. A little bit of planning, especially when combined with financial coaching, can go a long way toward taking care of yourself.
Are you ready to get started maximizing your financial plan? If so, Start Here and let’s talk about it.