April 13, 2021
Categories: Financial Planning
Four ways to rest easier about your finances
Worrying about money is hardly rare. Even people who aren’t dealing with unemployment or high medical bills can still agonize about affording daily expenses. And long-term goals like education or retirement, or a sudden downturn in investment values can turn anxiety all the way up to eleven, too.
But worrying about money doesn’t have to be a daily (or nightly) activity. We’ve got four tips that can help you decrease your money fears and brighten your financial future in the process.
1. Make and use a budget
Budgeting is an essential tool for taking control of your finances. A budget can help you eliminate overspending, save for the future and give you the security you need to make those “what ifs” fade from sight.
Keep track of your income and expenditures for a typical month. How much are you taking in and what is going out? What is your electric bill? Your rent or mortgage payment? Are you spending hundreds of dollars each month getting take-out? Look at places you can reduce expenses. Perhaps $50 a week for eating out will suffice. Is it worth it to find a car with a lower monthly payment and that doesn’t guzzle so much gas? How much are you able to save each month, and can it be increased? (see #2 below).
Our partners at Greenpath Financial Wellness have a budgeting workbook, Aligning Priorities, that is a great way to prioritize spending and see where reductions can be made. Download the Aligning Priorities workbook here.
2. Start an emergency fund
If it’s at all possible, set some money aside for emergencies in addition to your regular savings, even if it’s a small amount at first. Having an emergency fund will ease your mind about potential unforeseen expenses like a medical issue, a job loss or suddenly needed home repairs you can’t put off. Ideally, you’ll probably want at least 3 to 6 months of expenses saved up, though this timeframe and amount will vary for each person. Use your budget (#1, above) as a guide to calculate a minimum amount of money for your emergency fund. Automate these savings with paycheck deductions from your employer, or schedule account transfers so you won’t forget.
Read more about establishing a financial safety net.
3. Pay down credit card debt
It can’t be soothing to think about the high interest you might be paying on credit card balances, and fees to boot. Anyone with significant credit card debt may want to look into transferring high-interest credit card balances to a lower-rate card like The Summit Visa Gold Card. Doing so can make paying the debt down much easier. With a lower rate, you can take the money you were spending each month on interest and use that to cut deeper into the principal owed.
Another option to explore is getting a HELOC (Home Equity Line of Credit) to pay the credit card debt all at once. You’ll have to pay off the HELOC, but often the loan terms can be much more favorable. Just make sure you’ll be able to pay the HELOC installments on time without issue.
And if you know you have an issue buying too much on credit, consider switching to a debit card. This can help you only spend the money you have and prevent you from overspending.
Read our blog about why using a debit card is a good idea.
4. Find a financial advisor you trust
No matter what your financial situation is, it’s a wise move to consult with a financial advisor like the ones at The Summit Retirement and Investment Services. Financial advisors are not just for people with a certain amount of disposable income or net worth. Anyone can benefit from having someone look at your finances and figure out the best way to move forward.
A professional will help you define your short-term and long-term goals and create a plan on how to achieve them. Knowing you have a solid plan and someone knowledgeable in your corner can go a long way toward helping you sleep better at night.
Speak with a few potential advisors before you choose. Be sure to ask questions, both general ones about things like fees and how the relationship would work, and more specific ones that pertain to your particular financial situation like “how much do I need if I retire in ten years?” This will help you decide if that advisor is a good fit.
Get started today
Putting these tips into action sooner rather than later means putting those worrying days to bed earlier, too. Need more incentive to start now? Read 5 Reasons to Make a Budget.
Cynthia Kolko, The Summit Federal Credit Union