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:

Learn How to Earn with the Hip-Hop Stock Doc

Where did you learn how to earn? Probably nowhere. Most of us grew up without financial education.  Our schools didn’t require it.  And maybe our parents never learned either. Or they always handled the family finances for us. Then before they knew it, we were out on our own before they could teach us. So unless we’re part of a motivated minority who taught ourselves, most of us still have no idea how to manage money or build wealth.

But have no fear. With the internet and social media today, learning how to live it up for the long-term without going broke is easier than ever. Recently I chatted with Eric Patrick, a.k.a. the Hip-Hop Stock Doc, to find out how he went from pharmacist to money expert without any formal financial education. Not only is he self-taught, but he now teaches finance to others in ways that even the biggest arithmophobiacs can comprehend.

Learning How to Earn Outside the Classroom

Learn how to earn with Eric Patrick of The Black Market ExchangeAlthough Eric’s parents were bankers and he always excelled at math, his family never talked about finance much at home. It was just a few years ago when his career path changed course from medicine to money mentorship. He credits his wife for teaching him about budgeting and saving and for sparking his interest in finance.

As he learned from his wife, he recognized the need for an offensive strategy to complement her defensive strategy. He realized you can only decrease your expenses so much, but increasing your cash flow can be infinite. So, he delved into investing. However, once Eric started studying investing, he realized it was all the same old format. And it wasn’t relatable or digestible enough for the majority of people.

To change this scenario, Eric began sharing what he learned by connecting it to a universal language he and  his target audience liked and understood – hip-hop music. When people heard songs about poppin’ bottles in  the club, Eric wanted them to think about who made those bottles and how to earn an additional income  stream by investing in them.

Still, while Eric’s innovative and engaging teaching methodology in an otherwise dense and intimidating topic proves successful with his audience, I wondered what he thought about requiring formal financial education in schools, especially for those of us less motivated to educate ourselves later on. As kids, the pressure of a report card, and a parent’s wrath, is often all the motivation we need!

What About Financial Education in Schools?

Considering two-thirds of adults are financially illiterate around the globe, formal financial education requirements seem necessary to help people build fundamental personal finance skills from a young age. If Phys Ed is a requirement, why isn’t Fin Ed?

Eric says more financial components are making their way into schools, but much more progress is needed to teach people even basic financial life skills like budgeting, credit-building and doing taxes. Fortunately, educators have a wealth of lesson plan inspiration right at their fingertips with the creative and engaging tactics already used by successful financial bloggers like Eric.

Providing basic knowledge of personal finance in schools can have monumental impact, particularly for underserved communities where children do not have the luxury of being born into financial security. Future entrepreneurs stand to benefit as well since business success depends on solid money management skills.  But for those of us whose school days are over, we can always learn how to earn from people like Eric!

Other Tips

But what if you don’t like hip-hop? Or you just want more tips? Well, Eric’s financial wisdom spans a wide range. Here are a few additional pieces of wisdom he shared.

When talking about how much his wife helped increase his financial knowledge, Eric emphasized the value of having financial accountability partners. Whether it’s your significant other, your sibling, your friend or whoever, creating and sharing financial goals with someone you trust can provide major benefits even if you’ve never had formal financial education.

Also, compete with yourself to build wealth. Make it a game. Start with simple goals and then gradually up the ante.  For example, start with a goal of saving $10 in week one.  Then increase the amount for week two. Turn your goal-setting into a leisurely hobby and a habit.

In addition, today banks and other financial services providers are introducing apps and other technology all the time that are making saving and money management easier and more automated than ever.

The most important directive from Eric though is just to start somewhere. So on behalf of Eric, get motivated and go get that money!

Learn more about Eric and The Black Market Exchange: http://www.thebmex.com/team

Embrace Your Financial Fears and Live Abundantly Ever After

Overcoming your financial fears can upgrade your life significantly. As you know, surviving in this world requires money. And many of us desire more than mere survival. However, neither making money nor managing money come easily to most people in the world. But don’t worry. It’s very possible to go from surviving to thriving simply by facing your financial fears.

As someone without formal financial education, I know this fear of finance well. And having educated myself the past few years, I see how much power to build wealth for ourselves, our families and our communities lies in financial literacy.

Recently I had lunch in Santa Monica with Financial Expert, Eva Macias. We began discussing our non-finance backgrounds and how we both learned to embrace the intimidation triggered by the topic. Eva told me how she decided to become a financial advisor when she found out her parents were retiring with combined retirement income of just $1,100. Her insights strongly resonated with me, and I think they will with many of you too.

Why Do We Fear?

The irony is that we love showing off what money can do for us. We’re constantly on social media sharing our globetrotting adventures, our fancy dinners and our designer clothes. Yet we run for the hills when it comes to learning how to make money sustainably and build wealth. Even people with advanced degrees may know how to earn income, but they often lack personal financial care. Why?

Based on Eva’s experiences with her clients, she gives several reasons why she thinks people are scared of their finances.

  1. Denial. We don’t want to hear the truth. We’re ashamed because our financial woes are partly our fault. We overspend and we’re not committed to our financial health.
  1. Judgment. We don’t want to be judged. We know our financial state doesn’t look pretty but we’re doing the best we can.
  1. Time.  We don’t create the time to understand. We make excuses for not addressing our financial health by saying we’re too busy.
  1. Information paralysis. We get paralyzed by too much information and intimidating jargon. We grew up with little to no financial education requirements in school. And while there is a literal wealth of information right at our fingertips on the internet today, we don’t know where to start.
  1. Trust. We don’t trust ourselves to make the right decision. And we don’t find trustworthy mentors and advisors. By denying ourselves the opportunity to learn about our finances, we don’t trust that there may be simple solutions.
  1. Emotion. We’re scared to stray outside our comfort zone with financial decision-making. And we let emotions like guilt and love lead us to decisions that might not always be the most rational, practical or beneficial in the long-run. For example, is a prenup such a terrible thing?

All of these factors combined allow fear to reign, and we’re forced to make uninformed money decisions. Instead of finding reliable financial advice that applies to our specific situation, we default to making decisions based off the decisions of others without truly knowing whether it’s a good decision or not.

How to Overcome Your Financial Fears

Eva believes the primary way to overcome your financial fears is to embrace them. That’s the only way you’ll know where you stand financially and therefore the only way you’ll know how to move on up. Your situation might not be pretty, but it’s not the worst. After all, you’re still alive aren’t you? So, have faith in yourself and start tackling your financial issues one by one.

Many people yearn to live an abundant life. And Eva believes that by learning to manage your finances properly, you can. Financial security is a form of self-love that not only benefits you, but also everyone around you. Every money decision will come with a risk, but you can mitigate the risk significantly when your decisions are informed.

Financial independence is especially critical for women since they face much higher risk of poverty than men. You can’t assume the government, your parents or your spouse will always be there to support you. So, empower yourself. Be responsible for yourself. Become financially fearless. And live abundantly ever after!