April is Financial Literacy Month and with the increase in related news and information this month, it begs the question- Is Information Enough? Many people are well enough informed about normal healthy living to actually be healthy. Yet they still make choices contrary to achieving physical wellness. Knowledge is power only when applied through action. Let’s review 5 actions you can take today to create financial wellness.
Measure Your Current Financial Wellness
You cannot change what you do not measure. What does it mean to have financial wellness? It depends on who you ask and that person’s financial history. For a person who spends years mired down by debt, having enough money to pay that debt off could be the criteria for financial wellness. For someone else, it is having a good credit score and being able to save a minimum amount of money every month. Although subjective, your measure to create financial wellness should include at minimum having 6 months of savings put aside, being free of bad debt and spending less than you earn.
Identify Priorities Related to Debt Payoff
Not all debt is created equal. I love the concept of leverage- using other people’s money to build, buy or create assets that generate revenue. This is good debt-debt that nets a positive cash flow result. Bad debt takes money from you. Bad debt creates an expense with no offsetting financial benefit. As you tackle paying off your debt to create financial wellness, pick the lowest balance and pay it first. Then prioritize your highest interest rate. Other experts recommend that you do the opposite- pay your highest interest rate first. Tackling debt is challenging, and I want you to feel a sense of accomplishment that will keep you motivated. This is why I recommend paying off the lowest balance first.
Pay Yourself First to Create Financial Wellness
Napoleon Hill wrote about paying yourself first in Think and Grow Rich saying that, “Your first priority in any budget should be to set aside a fixed percentage of your income for savings.” The concept is to automate savings for yourself. Fast forward to the availability of direct deposit, online banking and scheduling monetary movements and it has never been easier automate savings. I challenge you to think beyond the rainy fund to ensure that you are paying yourself first for investments and asset building as well. In addition to your monthly contributions to savings and traditional retirement savings…how can you assign raises, bonuses and other opportunities for additional cash to an account specifically dedicated to investing in assets that will generate recurring income?
Fix Your Credit Report
Recent consumer surveys and studies have found that 1 in 5 credit reports contain errors. Your credit score is a measure of financial health. A good credit score and positive report doesn’t just make borrowing less expensive. It also can be the difference maker for you in applications for insurance as well as jobs. Your credit score is a measure of your financial reliability and personal integrity. If it has been more than 6 months since you reviewed your credit report- do it today. Request your report from each of the 3 credit reporting bureaus and look at each report carefully. Not all creditors report to all three agencies… so you may find information on one that is not on another. The important thing is that all of the information you find is reported accurately in order to create financial wellness. If not- it is within your consumer rights to request that information be corrected.
Pay Attention to Where Your Money Goes
Convenience is king and all our favorite brick and mortar retailers, restaurants, coffee shops and online stores have removed as many barriers as possible to you spending money with them. Waive your phone, send money with a swipe, or pull out the trusty credit card. Pick your preferred method of payment because spending money is easier than ever. How often are you looking at how much you are spending and where? Download your last month of activity or pull out those paper statements if you still get them and take a look at how much you are spending housing, food and entertainment and vehicle expenses. Create additional categories that apply to you and if you don’t find any surprises… do it for another 2 months. As I shared at the beginning of this article- you cannot change what you do not measure. Start measuring today.
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