Why Your Financial Health is Sick, and How to Cure it

Welcome to 2018, the new year and with it lots of concern over getting healthier.

But why can’t the health craze that ensues as part of the New Year’s Resolution to lose weight also pertain to remedying something else that looks awfully sick.

Your financial health.

Doing a financial check-up isn’t just about budgeting or your retirement account (although those two things are important and certainly leading indicators of how you’re doing money wise), but taking a broad approach to your finances, making sure your money is working in your favor.

Ask yourself, how are you spending money? Is it smart, prudent and keeping saving in mind?

Do you have enough in your retirement account, and if not, how do you fix it?

Is my budget really streamlined to the tune of being able to build an emergency fund?

The less than ideal future of financial well being is being tested, what with the stock market in a state of influx, and people now more than ever worried if their money is going to withstand one more hit to that market, and what they can be doing better.

Also playing into this equation is household debt as a whole, with cars, education, credit cards and other personal loans making it that much harder to save, and all the more reason to start budgeting and saving properly, and making sure financially you’re in tip, top shape.

Total debt is a staggering 1.3 trillion dollars, and the average student loan is $49,000 in total, with personal loans and credit card debt around $15,000 per person.^[1]

If debt is something you struggle with, adding more to it isn’t the answer, nor are balance transfers unless you plan on paying it back within the allotted time period of the promotional rate.

Adding to your overall financial plight is your savings account, or lack of one.

If you’re under the age of 35, you’re averaging a media savings amount of $1,580, and between 35-44 it bumps up to $5,000, with $11,000 being the balance over 75 years of age.^[2]

Those numbers are concerning when you consider car repairs, home improvement that is necessary, health co-pays, medical bills in general, and rising costs of anything from food to phone bills.

The fact remains that having a financial plan is a necessity, but examining where you are in certain facets of money (budgeting, retirement, investing, spending) is equally important.

If your finances are waning and looking a little green around the gills, then you’re going to have to change for the better, and doing so means adjustments that are hardly difficult but instead simply need addressed sooner than later.

Here’s how to get financial well (rounded) and start curing what ails you financially:

Comb Over: Why you should address “wants” in budget

How good is your budget? That question is one that should be met with some skepticism if you’ve immediately replied “great” or “no problem.” Not to say that your budget isn’t functional, but is it producing results or is it bloated, overweight and desperately need of being trimmed down.

Bottom line: Is your budget healthy, lean and mean and exactly where you want it so it can produce additional amounts of free-flowing cash to save?

If you aren’t able to save 5 to 10 percent of your income after taxes, then your budget needs fixed.

Consider aspects of of your expenses or the expenses as a whole that are more wants than needs, such as internet, cable TV, cell phone plans and money set aside for dinner or lunch as takeout options.

The average cost of a cell phone bill, for one line, at Verizon is around $80, with the national average around $50 to $60.^[3]

Some prepaid options allow you to spend less, or smaller carriers often provide better rates, and a comparable service as a result.

From phones to food, how’s that grocery bill stacking up to the take-out menu clipped to your fridge?

From 2015 to 2016, Americans spent more money on take-out food than they did groceries: 54 to 52 billion dollars, and that would suggest that most are double-dipping.^[4]

They spend money on groceries, and rather than prepare food; they order take-out on top of that first expense.

You have to be smarter with your money to help change your financial outlook, namely saving money from one month to the next. As much as you can’t live without TV or cell phones and the convenience of dining out is so hard to resist, you’re wasting money that belongs in your bank account.

Don’t be afraid to maximize how you spend, based on certain months, too. For instance, as the winter months wind down, you can’t help but save money on winter clothing, even though it will be rendered obsolete in a few months when the cold is no more.

That shouldn’t stop you, as the average discount on winter clothing and outerwear in February is about 50 percent.

Income Desensitized: Why you should always be generating income

So it’s easy to say when it comes to bettering your financial health to simply make more money.

Easier said than done, and that point is noted.

But if you can’t snap your fingers and find a better job or march into your bosses’ office and ask for a raise and get it just that quickly, don’t fret.

To add income to the equation, and thus be able to save more money, why not consider a second job that is convenient, comb through what you aren’t using as far as goods go and sell them or if you are spending money, find ways to get cash back as a result.

About 5 percent of the population holds down a second job.^[5]

That comes, one would assume, to fill out your income in order to save money. The red flag on a second, part-time job is if you’re taking it to just cover day to day expenses, and if that’s the case, see the first bold item on this list above.

A second job should be convenient, and not one that adds to the painstaking process of getting up and going to that first job of yours.

A recent study showed that 1 in 5 Americans have a part-time job and earn as much as $500 per month, but they know how to pick something that is purposeful and poised not to be a huge inconvenience.^[6]

Jobs that pay well include transcribers, writers, proof readers and typists, most of which are well over the $10 per hour marker and can be done from your home.

As for selling off your assets, consider how much you can make for something collecting dust. Those who are financially healthy make it a point to consistently take inventory of what they have and what can be sold, even if it’s an old smart phone or a dresser that is in good shape.

Garage sales, online auction sites like eBay are huge hits in that respect, as long as you can keep your cost down. Avoid overspending on ads in newspapers, most of which will cut into profit and instead use free sites like Craigslist. Or, flip the script and buy at garage sales and resell on eBay. It’s time consuming but nets about 462 percent in profit margin when you follow that plan.^[7]

Remember, financial health and well being is also about getting creative with how you earn.

Retirement Reality: When in doubt, max out and know rules

Having a retirement account in general is a good start, but are you simply contributing “something” and not really totally understanding how to get the most out of it?

Knowing the rules of a 401K, for starters, is right up there between those who are financially healthy versus ones who are struggling or just embracing the status quo.

For those with a 401K, you are allowed to contribute the maximum of $18,500 per year, pre tax if you’re under the age of 50. Once you hit 50, that number goes all the way up to $24,500.^[8]

Whichever criteria you fall into, make sure you’re taking full advantage of maxing out what you’re putting in, mostly due to the fact that companies tend to match or give 50 percent of what you’re contributing. Anything less than maxing out is losing free money.

If you’re of the opinion that you can’t “afford” to give more than 3 to 6 percent, a small amount, then you need to rethink increasing your income or adjusting your budget.

Retirement isn’t without its financial worries, too, especially when you consider you’ll need about 70 percent of your highest income level annually on hand to retire comfortably.^[9]

The good news is most are getting financially well and saving $1 million into retirement accounts at a record pace. The total number of $1 million balances in 401K’s jumped to 150,000 total accounts, per Fidelity, versus 93,000 one year ago. The 150,000 total number represents the final quarter of 2017.^[10]

Still, those encouraging statistics come with it others who are scrambling to save, those who haven’t made it a priority and now are fretting the idea of retiring any time soon, even if they’re of the age when you start contemplating the move.

Remember, if you’re 50 and your retirement account isn’t where it needs to be, max out, even if it means letting go of monthly expenses.

And a good rule of thumb as far as retiring and how much of your income you should be saving: keep it around 15 percent, and you’ll be right in line with those who are financially smart, savvy and sure to retire with ease.^[11]

If you’re still of the opinion that “all is well,” and any wholesale or small changes aren’t in order, you’re not only letting money slip through your fingers but also the peace of mind knowing that your retirement, budget, immediate savings plan and other financial benchmarks of that ilk are on track.

No one is suggesting any sort of change to your financial route is easy. Much like adding exercise to that New Year’s Resolution isn’t going to come easy, making time to go the gym, trying to avoid distractions at home.

But getting over that barrier means going without, being smart about where your money goes (aside from a department store or on vacation) plays an enormous part in your decision making moving forward.

Financial concern still is running rampant, despite an economy that has improved. Approximately 65 percent of the American population says they worry about finances and money.^[12]

And while some individuals worry and fret over money even if they’re perfectly fine, chances are most are tossing and turning and suffering from sleepless nights because they aren’t in tune with how their money works and certainly can’t believe in the heart of hearts that they’re doing all they can to fix it.

Yes, changing your money woes is going to take time, patience and in part a commitment to altering what has been day-to-day life as far as money is concerned.

But if your finances are failing, and the prognosis isn’t good, the only thing left to do is address and correct your shortcomings and watch your finances nurse themselves back to perfect health thanks to you having the foresight to find the silver lining lost in what was once a bleak financial outlook.

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