There’s an uncertainty associated with financial wellness. Are you financially fit? And if so, how fit are you?
While there is no clearly defined threshold for answering affirmatively, much less grading your level, there are baseline elements associated with financial fitness. To make sure you’re on the right track, consider these steps to help you develop a financial plan that lays out clear goals and timelines.
As a first step, make a reasonable and practical budget, assessing your income and expenses (monthly, if possible) to understand your cash flow and identify areas where you can trim costs. Revisit and revise your budget regularly to make sure it aligns with your personal circumstances.
Save for Unexpected Expenses
Expect the unexpected, such as a medical emergency, major car repairs, or an appliance replacement. Establish an emergency fund that can cover these costs. Ideally, you want to keep 3 to 6 months’ worth of living expenses in this fund. Without a backup source of savings, you may have to incur credit card debt, which can be challenging to overcome.
Check your credit report periodically, making sure that there are no errors. You can also use it as a tool to make sure you have paid bills on time and have stayed within your established credit limits. Using less than 30% of your overall credit capacity can increase your credit score. Note that you are entitled to a free copy of your credit score annually from all 3 major credit reporting companies: Experian, Equifax, and TransUnion. Visit www.AnnualCreditReport.com to obtain your free reports.
Establish Long-Term Financial Goals
Saving for your retirement is a personal decision that will help shape your lifestyle during your golden years. It’s never too early or too late to work with a financial professional to strengthen your retirement plan.
Review Your Plan
Establishing a financial plan is not a one-and-done proposition. Review your plan at least annually, revising it as necessary to align with your financial goals.
Increase Investment Potential Faster with Early Contributions
Finding ways to invest early and often, such as a small recurring investment over a long period of time, has the potential to produce greater returns versus investing a larger amount over a shorter period.
For instance, if you invest $75 a month beginning at age 25 and continue until you are 65, your earnings will be greater than a 35-year-old investing $100 a month until they are 65 (assuming an equal rate of interest for each.)
By following these steps, you can create a strong foundation that will help you become financially fit and maintain your financial wellness over time. Elements Wealth Management can help you build on this foundation by providing you with sound advice and assistance that will take your financial fitness to the next level!
Request a complimentary consultation, either in-person or virtual, to learn more about managing your unique financial fitness situation today!