Sixty-three percent of Americans say they feel financially confident, yet the number one source of stress — regardless of age or life-stage — is personal finances, according to a recent MetLife study. This disconnect between perception and reality can lead to uncertainty and stress. It can also prevent each of us from gaining a true understanding of our financial situation and preparing for the future.
According to the study, nearly 50 percent of employees live paycheck to paycheck, and only 6 out of 10 have a plan for how to spend their money and actually stick to it. This suggests many of us have trouble balancing unexpected expenses and planning for the future, two key elements of financial wellness.
Assessing your financial situation and figuring out how to take control of your money may seem overwhelming, but it doesn’t need to be. In fact, you can get started with just 4 simple steps.
Put together a budget. Following a plan for how you spend your money each month can help you live within your means. Start by listing out your monthly income and recurring expenses like home and car payments, utilities, groceries, insurance, etc. This will help you determine how much money you’ll have leftover to save, pay off debts or use for discretionary expenses like entertainment, clothes and dining out. Here’s a great tool to get you started.
Create an emergency fund. Forty percent of us couldn’t cover an unexpected $400 expense without selling something or borrowing money. Protect yourself by setting aside 3 to 6 months of income to cover unexpected bills or something more serious, like a job loss or major household repair.
Participate in your workplace retirement plan. Many companies match employee contributions up to a percentage of your annual income. For example, for every $1 you contribute to your 401(k), the company could contribute 50 cents. If your employer offers a program like this and you’re not taking advantage of it, you are missing out on “free” money.
Utilize your workplace benefits. Reach out to your Human Resources department to learn about your voluntary benefit options. Benefits such as disability and accident insurance can provide a financial cushion if you are injured or too sick to work. Also, an increasing number of employers are offering financial wellness programs that can help you learn more about your finances and put practices in place to manage them more effectively.
The key to improving your financial health is to remember it’s a process. It won’t happen overnight. Like any other meaningful goal, it takes time and effort. But, by starting today with these basic steps and staying focused, you’ll be on the path to making your financial wellness a reality.
Access our other tips on how to achieve financial wellness by clicking here.