Financial Planning Made Easy

In a world full of uncertainties, having a solid financial plan is not only a good idea, it’s a necessity. It all starts with understanding what it means to have financial wellness; having the knowledge, skills, and resources to manage your money and make sound financial decisions aligning with your beliefs and goals.

5 Steps for a Healthier Financial Future

We all deserve the opportunity to achieve financial wellness. Whether you’re just starting on your journey or looking to improve your current financial situation, you just have to take it one step at a time.

1. Establish financial goals and priorities

The first step towards achieving financial wellness is establishing your goals and priorities. Ask yourself a few key questions.

How does my current financial situation make me feel? 
If I could achieve any financial goal, what would it be?
What does my perfect financial situation look like?
What financial dreams do I have on hold?

With a better understanding of what you want your money to do for you, make a list of your short- and long-term financial goals. Examples include:

• Paying off credit card debt
• Saving for a down payment on a home
• Starting a business
• Building an emergency fund
• Saving for a dream vacation
• Increasing retirement contributions

Now it's time to prioritize your goals by urgency and importance. For example, paying off high-interest debt should be a higher priority than saving for a vacation. Keeping your goals in sight, such as on your refrigerator or desk, can help you stay accountable and focused.

2. Create and stick to a budget

1. Track all your income and expenses: Income includes everything coming in, while expenses include everything going out. When you account for every penny, your true spending habits may surprise you.
2. Cut unnecessary expenses: With a better understanding of how your money ebbs and flows, look for opportunities to reduce spending. Consider eating out less often, canceling subscriptions you no longer use, or finding ways to reduce utility bills.
3. Create categories: Organizing your budget into clear categories can help you better manage your spending and stay on track toward your financial goals. Start with your necessary expenses, like housing, utilities, groceries, and transportation. Next, categorize your spending, such as entertainment and shopping. Remember to include categories for savings goals like emergency funds or retirement contributions. Put a financial cap or goal on each category based on your income.
4. Stick to your budget: Good intentions aren’t enough — budgets only work when we stick with them. Regularly review your expenses to ensure you're not over budget in any of your categories. Avoid unnecessary purchases and adjust your budget as needed (i.e., getting a pay raise or taking on additional bills). Consider using budgeting apps or spreadsheets to help you stay organized and on track.

3. Reduce debt and avoid high-interest loans

If you’re struggling with debt, you're not alone. According to Experian, the average American consumer is $101,915 in debt, which includes auto loans, credit cards, mortgages, and personal loans. Last year alone, the average consumer credit card debt balance was $5,910.

However, debt can keep your financial progress at a standstill. Reducing debt and avoiding more is crucial to improving your financial wellness. Luckily, it doesn’t take much to make a big difference.

Let’s say you have $5,000 in debt with an annual interest rate of 20%. By paying only the minimum, you’ll pay $11,000 in interest over 20 years before paying off the loan. But if you add an extra $10 to each monthly payment, you’ll save over $8,000 in interest and be debt-free in just over four years. Little by little, a little becomes a lot!

Here are some tips for tackling debt.

1. Make a plan: Whether you choose a snowball or avalanche approach, stick with it and put all your extra funds towards your debt.
2. Negotiate interest rates: If you have a good track history with your lender, try negotiating for a lower interest rate.
3. Consider a balance transfer: Transfer existing debt to a card or loan with a lower interest rate to save money and get out of debt faster.
4. Avoid taking on additional debt: Before paying with plastic, ask yourself if it’s truly necessary or if you can wait until you have cash in hand.

4. Invest in long-term savings

It’s never too early or late to begin putting money away for your golden years. Whether you’re just getting your professional footing or you’ve been climbing the corporate ladder for decades, now is the time to start setting money aside for retirement.

When it comes to long-term savings, there are multiple options to explore:

• 401(k) - Employer-sponsored programs that allow for pre-tax contributions
• Individual Retirement Account (IRA) - Personal accounts with tax advantages 
• Mutual funds - Pooled money from multiple investors
• Real estate - Purchasing property for rental income or appreciation
• Stocks - Purchasing shares, or equities, in individual companies
• Bonds - Considered a lesser risk than stocks as they offer a fixed income stream

Investing can be challenging and even intimidating. Speaking with a financial consultant can help you gain knowledge and confidence in your investment choices.

5. Stay informed and empowered with personal finance knowledge

Just like physical or mental wellness, financial wellness requires ongoing maintenance. It's not a one-and-done task. 

Stay informed and up-to-date on personal financial topics, including budgeting, saving, and protecting your identity. Read financial blogs and books. Join online support communities and attend virtual workshops. Take a money personality quiz to understand how you tick financially. There are countless resources available to deepen your understanding of personal finance. 

If you are unsure of your next financial step, don’t be afraid to ask for help. Trusted professionals, like financial advisors, can help you make informed financial decisions.

Achieving Financial Goals One Step at a Time

Achieving financial wellness takes patience, discipline, and serious dedication. But knowing that you’re using your money in the best way possible and working towards achieving your financial goals is a worthy pursuit.

Remember, there’s always time to start improving your financial health. If you’re ready to create a healthier financial future, take the first step today.

As your trusted partner in achieving financial wellness, Provident Credit Union is excited to offer a personal finance program — Enrich — designed to help people in all stages of their financial journey. Receive a personalized financial assessment, discover your financial stress score, and track your progress. And staying focused on your goals pays off if you enroll in Enrich’s monthly challenge. Simply take the free recommended courses, and you’ll be entered to win one of two $500 rewards each month. With a few simple steps, you can improve your money skills and set yourself up for financial success and greater peace of mind.

Visit Financial Wellness Center