4 Tips to Improve your Financial Health

Health is at the front of our minds this time of year. Many New Year resolutions involve making healthier choices, like getting an appropriate amount of sleep, exercising more, and striving for a balanced diet. While you’re in this mode of self-improvement, why not extend these new habits to your finances as well?

Financial well-being is defined as having financial security and financial freedom of choice in the present and the future. If you’re unsure about your financial health, find out your financial well-being score by taking this test on NerdWallet.

Don’t be discouraged if you’re not as financially healthy as you’d like to be, here are a few tips to help you get your finances in order for the new year:

  1. Create a budget.

A simple budget is a great place to start and can help you understand your financial flow. Figure out your net worth, or the difference between your assets versus how much you owe. It’s normal for your net worth to fluctuate over time, and it’s a good practice to calculate it once a year to track your progress. From there, you can create a more detailed budget to help you plan for expenses and reduce unnecessary spending. If you need help creating a budget or are looking for a template, click here.

  1. Save for emergencies and adjust for lifestyle inflation

As your monthly surplus (or the extra money left over after paying necessary expenses) grows, you can establish a savings account for emergencies. These extra funds will take the pressure off so that you don’t have to live paycheck to paycheck when emergencies arise. It’s also important to adjust for lifestyle inflation as your net worth grows. It’s easy to spend more as you make more, but paying close attention to your budget will help you increase your savings as your income grows.

  1. Get rid of bad debt

Bad debt is defined as debt incurred to buy things that quickly lose their value and do not generate long-term income (e.g., a daily coffeehouse cup of coffee) or debt that carries a high interest rate (e.g., payday loans and high interest rate credit cards). In order to save as much money as possible, pay off debt with the highest APR (annual percentage rate) first.

  1. Save for retirement

Financial planners often recommend opening a retirement savings account, even if you’re currently in debt. Retirement is often overlooked when assessing financial health, but the sooner you start investing, the more your money can work for you by gaining compound interest. If you’re still in debt, investing 2 to 5% of every paycheck is a good place to start. As you pay off your debt, you can increase the amount you put towards your retirement savings. If you have the option of investing in a 401(k) at work, try to contribute the maximum amount that your employer is willing to match.

 

Family Finances: Aussie Insights from The Fiscal Mum

While marriage and kids offer many priceless benefits, having to deal with family finances is probably not one of them. Making and managing money as a single person was hard enough!

Navigating your financial relationship with your significant other can be stressful. Then throw kids into the mix, and it’s no wonder 15% of Gen Xers (35-54) and 36% of Millennials (18-34) argue about finances every week. But it doesn’t have to be this way.

Through the internet and social media today, money experts use colorful, engaging methods to deliver financial education right to the palm of our hands. Rebecca Maher, aka The Fiscal Mum, is one such financial expert based in Australia who specializes in helping people manage their family finances.

Rebecca Maher, The Fiscal MumRebecca’s first experience working as a financial planner left her disenchanted. She felt the industry’s prime motivation was closing the sale rather than understanding the real needs of the client. She felt that most financial advisory services only had a handful of cookie-cutter products they were trying to push on people—primarily high net worth individuals and retirees who already had accumulated money and assets. The industry was neglecting people who needed guidance most. So she jumped ship to pursue other opportunities.

However, Rebecca’s perspective changed when she started having kids. Surrounded by other new “mums,” she recognized a glaring need for financial advice among those whom the traditional financial planning industry was neglecting. Although Rebecca’s first impression of the industry had been negative, she felt compelled to give it another shot, albeit on her terms.

Becoming The Fiscal Mum

With a formal education in business studies and international finance, one might assume Rebecca had launched her financial planning business with ease. But she reminds us that business finance is vastly different from personal finance. She says much of her personal finance knowledge is either self-taught or from lessons learned from her father. Australia’s government and not-for-profit organizations have some initiatives to advance financial literacy in school settings, but they’re mostly ad hoc rather than part of a formalized curriculum.

Through her father’s fiscal responsibility, Rebecca learned that when used properly, money is a tool that can help you live the life you want. Rebecca thinks many people resist seeking out financial advice because they believe planning for the future means making serious sacrifices today. Rebecca’s goal is to help families balance these two competing interests.

In her work with mothers (and couples), Rebecca finds that increasingly women are seeking the empowerment that comes from financial literacy and informed decision-making when it comes to family finances. They don’t want to rely solely on a spouse. She thinks the “mompreneur” trend with mothers starting their own businesses has become so popular because women seek the validation that comes from contributing to household income. Otherwise, many women report feeling inferior and that they don’t have the right to a say in household financial decision-making.

However, Rebecca emphasizes to her clients that properly managing family finances is just as important for creating and maintaining wealth as the number of dollars that their spouses or themselves bring through the front door. We’re socialized to keep chasing more money and the status that comes from having it. But the vital importance of backend monitoring is often left out of the conversation.

Introducing Responsible Money Concepts to Your Kids

Although her two daughters are still youngone is a toddler and the other an infantRebecca already is planning how she’ll impart financial wisdom to them. For young children, Rebecca encourages taking advantage of “teachable moments.” When you’re in the supermarket, for example, you can introduce the concept of budgeting by telling your kids about the price of items in your shopping cart.

Then as Rebecca’s kids get older and start earning money with their first jobs, she plans to sit them down more formerly to discuss budgeting, saving, opportunity cost, etc. Also, she plans to teach them about investing through the small investment portfolios that she’s already started for them. Rather than teaching her kids using theoretical money, she believes her lessons will be much more engaging and impactful using their own money!

With one of the highest levels of household debt in the world relative to GDP, Australia has a lot of families in need of financial assistance who can’t afford traditional financial advisors. Non-for-profit organizations and government programs exist, but many are overburdened and under-resourced. And the situation is similar in many other countries. But fortunately, people like Rebecca are out there helping people who need it most, including her own children.

Thank you to Rebecca and everyone else around the world working so hard to advance financial literacy and security in your communities!


Learn more from The Fiscal Mum:

3 Ways Women’s Financial Empowerment Can Improve Your Love Life

“I have come to believe that caring for myself is not self-indulgent. Caring for myself is an act of survival.” – Audre Lorde

So how can women’s financial empowerment keep sparks flying for lovers the world over? Fortunately, I have Anna Haotanto, Singapore-based CEO and Founder of The New Savvy, to help me count the ways. But first, let’s define what we mean by women’s financial empowerment.

Closing the gender pay gap and instituting better maternity (and paternity!) benefits are two big aspects. But we also mean things that don’t require larger policy changes, like boosting your financial literacy and sharing household financial decision-making with your significant other.

While personal finance doesn’t exactly evoke the warm-and-fuzzies, it does have a major impact on romantic relationships around the globe. In fact, money is the leading cause of stress in relationships. And multiple studies find that one-third of couples have serious recurring arguments about money-related issues. While these studies focus on American audiences, Anna finds these trends similar in Asia.

But what’s women’s financial empowerment got to do with it? Here are a few ways leveling the financial playing field in your relationship can extend benefits far beyond your bank account.

How Women’s Financial Empowerment Can Improve Your Love Life

  1.  Fewer Arguments and Less Stress

In most societies, men are typically the breadwinners who manage family finances. In fact, one-third of married women in developing countries are powerless over household spending on major purchases. Meanwhile, two-thirds of the global population is considered financially illiterate. Evidently financial health is not guaranteed solely by making money. So why not let the ladies lend a hand?

Here’s what happens when money isn’t a taboo topic and couples work together as a team. They have equal access to household financial information. They educate themselves together on personal finance. And they make financial decisions jointly, particularly major ones. Considering nearly 80% of couples who talk about money at least once a week say they are happy, it sounds like it’s worth a try for lovers everywhere!

Anna suggests that greater balance of financial power can lessen resentment between partners when things go wrong. Also, stress is reduced when partners have a savvy confidant with whom to share decision-making and other financial responsibilities. And women often experience boosted self-esteem when they can earn money that contributes to family income.

  1.  More Income to Support Your Desired Lifestyle

Some women may not want to or have to work. And that’s great. But for those who do, additional income for your relationship means greater financial security, and hopefully some discretionary funds for the fun stuff. More date nights. More traveling. Fancier clothes. Or whatever you desire.

While quality time with your significant other doesn’t have to cost a thing, sometimes those exciting, once-in-a-lifetime opportunities come with a price tag. Money can be a double-edged sword, but the “good” edge can help prevent your relationship from going stale, or even toxic.

To borrow a quote from Elle Woods in Legally Blonde, “Endorphins make you happy. Happy people just don’t shoot their husbands, they just don’t.”

  1.  Financial Security for Whatever Happens

In college, Anna volunteered with many women stuck in unhappy relationships because they couldn’t support themselves— not to mention their children—if they left their spouse. This experience motivated Anna to become financially independent so that she never ended up in the same situation.

Some relationships last forever. Some shouldn’t. And some don’t. So always be prepared to stand financially on your own two feet, both in your ability to generate sufficient income and to make good financial decisions with that income. If one relationship ends, keep your personal finances on point so you can experience all the blissful benefits of numbers 1 and 2!

How Women (and Anyone!) Can Achieve Financial Empowerment

While you help push for larger scale policy changes across the globe, Anna has plenty of other tips to strengthen your love life now, regardless of your gender!

She says read at least one finance or business article daily. Find resources that limit the use of confusing financial jargon, like The New Savvy. Also, make your money work for you. Learn to invest, or build a home-based business, particularly when you’re caring for young children.

Additionally, consider consulting a licensed financial professional. Sometimes we need a reality check to realize we’re in a bad situation. But shop around for a consultant whom you trust will identify proper solutions for your specific needs. According to Prudential, “Only one in five women feel the financial services industry truly understands their needs—the same percentage as men.”

Lastly, maintain an affordable lifestyle and start saving early. Estimate future income and expenses, like health care and insurance, and update your retirement plan accordingly.

Now the rest is up to you! Go spread the love!

Learn more about Anna and The New Savvy:
Website – Facebook – Instagram – LinkedIn