Introduction
Having your finances under control is key to living a healthy and well-balanced life. These 8 tips for financial wellness will help you get your finances in check and implement healthy money habits.
Bad finances are usually the result of poor financial literacy. The good news is that you can easily improve your finances following effective personal finance tips.
Find out how to turn your finances around fast with these 8 simple tips for financial wellness.
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1. Have a budget
Whether you do it on paper or Excel, having a budget is key to good Personal Finance. You need to know how much money you make and where your money goes. It is the very first step to follow if you want to have your Finances under control.
Unless you have a lot of debt and want to pay it off as quickly as possible, you do not need to budget every penny. The idea here is to know how much you spend and how much you can save monthly.
If you are aiming to pay off your debt really fast and need advice, Stay tuned. A detailed post on this matter is coming, and I am sure it will help you in this process.
If you need help creating a budget you can live by, this post on how to create your first budget will help you.
2. Save for Financial Emergencies
I wish someone had told me this earlier, so I will never stress this enough. The earlier you start saving, the better. There is no rule on how much you should save, but you should consider having 2 funds.
The first one is an emergency fund. Many books recommend having about 1000$ in this fund before starting to save on the second one. This is based on Dave Ramsey’s strategy to pay off debt.
Although this strategy helped thousands of people, I think saving 1000$ in an emergency fund is no longer enough in 2021 and would recommend having at least half of a monthly income in this fund.
This fund aims to be able to pay for unexpected expenses without having to use credit cards. Having such a fund should be a priority as it will help you avoid additional debt. Automating your payments is the best way to ensure you will save regularly.
You should also pay yourself first, so you should save money as soon as you receive your salary and not wait until the end of the month to put that money aside.
3. Have a survival fund
The emergency fund is a fund you can use to pay unexpected expenses. Your survival found is a fund you should never touch. This fund should help you survive if you happen to lose your only or main source of income.
Again, the amount you put in this fund depends on several factors, including your country and the number of income streams you have. It is usually recommended to have the equivalent of at least 6 months of expenses in this fund.
4. Spend less than you earn
This one is obvious, but no one will ever stress this enough. No matter how much you make, you should always live below your means and avoid lifestyle inflation at all costs.
Just because you make more doesn’t mean you need to spend more. You should actually save more!
This tip will boost your finances and your self-esteem. Think about saving as a long-term reward. You will sacrifice little things you wanted for a few minutes or days to get the life you have always wanted. It is completely worth it!
5. Keep fees as low as possible
Having several bank accounts is generally recommended. This is important if you are not used to carrying cash with you. I already got my card swallowed by an ATM on a Friday night and can tell you that spending a whole weekend with no cash is no fun.
On the same level, having your only e-banking unavailable because of site maintenance can be annoying if you need to make urgent payments.
After a few bad experiences, I decided to open several bank accounts. I can tell you that although budgeting gets a bit more complicated, it will really help you save money.
6. Consider refinancing your loans
This might seem a bit strange as you are probably trying to get rid of debt. Taking a new loan can seem counterproductive, but you should really consider it. This is especially true if you took your loan a long time ago.
Your income has probably increased since you took that loan. If that’s the case, you can definitely negotiate a better rate!
People don’t know that if they request a loan to several different banks, they can actually negotiate the interest rate that will apply.
I personally refinanced my loan and saved thousands of dollars in interest as I negotiated the rate from 9,95% to 5,95%. It is definitely worth giving it a try.
Another simple way to save money on interest is to get a loan to pay off your credit card balance if you can’t afford to pay more than the minimum payment.
Credit cards have higher interest rates so taking a loan to pay off your credit card debt totally makes sense.
7. Think about your retirement and Start Investing
This will probably be the most important decision you can make for your future.
No matter how young you are, you should start saving in a retirement plan. The rule of thumb is to save 15% of your monthly income from age 25 to 67. Yes, this is a lot of money.
The good news is that this 15% rate already includes the part paid by your employer. Starting early is important because it allows you to save more money.
It will also give your money enough time to recover from the market’s downturns.
If you start saving for your retirement at age 25, you should save 15% of your monthly income. The rate increases to 18% if you start saving at 30 years old and 23% at age 35!
This seems like a lot of money but remember: according to research, you will need a minimum of $ 1,000,000 to be able to keep up with a normal lifestyle during 20 years of retirement.
Again, this number is a minimum, and the amount required to retire serenely can vary significantly depending on many factors (age, health, country, lifestyle…). So, do yourself a favor and start saving now!
Investing your money is the tip that will help you boost your finances with very little effort. You will be able to make money while you sleep, and there is no better way to accumulate wealth.
8. Ask for advice
This tip is directly linked to number 7 but applies to other types of investments as well. You should not be afraid to ask for the advice of a professional. This is really important as investing can be tricky and confusing at first.
Have you ever invested in a bad asset? Or maybe, you did like me and invested in the right asset at the wrong time?
Even if you have to pay for the services of a professional adviser, it can save you lots of money.
You should never hesitate to ask for advice before investing your money.
The last time I did so was about 5 years ago when I started investing for retirement. Choosing the right plan with the help of a professional helped me save over $30,000 on fees.
This is the reason why this tip for financial wellness is probably the most important. Investing comes with a lot of risks. Asking for professional advice is something you have to consider.
Final Thoughts
No matter your goals in life, having your finances in check will be key to helping you live a healthy, well-balanced life.
Finances are such an important aspect of life that you simply cannot ignore them. Having healthy finances will offer you plenty of life opportunities, allowing you to work less, take more vacations and dedicate more time to personal projects.
These 8 tips for financial wellness are a great place to start to get your finances in check.
And the good news is that improving your finances does not have to be hard. With the right tools, you can see significant improvement in your finances in a few weeks only.
Start working on your finances today using the free budget sheets below!