Tips For Reaching Your Financial Wellness Goals
Chances are if you set goals for the new year, one of them is to improve your financial wellness. According to the 2020 Pinterest 100 Report, improving our relationship with money will be one of the most popular trends of the year. It’s not surprising since, for many of us, managing our money is a challenge.
It's About Finding Balance
The challenge is to find the yin and the yang of responsible financial management. You cannot put a value on the ability to drift off to sleep without worrying about paying the bills, crushing credit card debt, finding the money to buy a home, or having a secure retirement. So how do we achieve financial peace of mind? We set goals and then implement a plan to achieve them.
According to the Pinterest report, the most popular money goals were budgeting, paying off debt, saving, and investing. Thankfully, there are many tools and tricks available to help us reach those goals and secure our economic future. We can do this! Yea us!
Creating a Budget
The budget is the foundation upon which your financial plan rests. I think of it as the roadmap where I can plan the best route to get where I need to be in terms of my goals. To gain control over your money, you must know how much is coming in and where you spend it. There are several techniques to help you keep track.
The 50/30/20 is the budget Elizabeth Warren highlights in her book, All Your Worth: The Ultimate Lifetime Money Plan. The basic plan is to break down your after taxes income into the three expense categories of needs (50%), wants (30%), and savings/debt repayment (20%). This budget is popular because it is simple and easy to follow. However, it may not work well for those in lower-income brackets, who spend more than 50% for necessities and for people who need to pay off significant debt.
The 80/20 technique offers more flexibility than the 50/30/20 method. You skim the 20% right off the top and save it however you choose and then spend the remaining 80% freely. The beauty of this budget is you can design this method to work for your particular financial circumstances by making it the 70/30, 60/40, or 50/50 depending on how much you want to save. I also like the concept of paying your savings first.
The zero-based or traditional budget accounts for every dollar of your income and how you will spend it at the beginning of each month. Warning: unless you are an extremely detail-oriented individual this technique is probably going to be torture and for the creative spirit, it lacks the spontaneity you enjoy. However, for those who embrace getting into the weeds or need to control spending. This option may be the perfect budget for you.
Lastly, before we move on to the subject of debt, for those who love apps, we are here for you too! There is a treasure of tools available to assist you in tracking your money. For starters, check out Mint, Mevelopes, Wally, and You Need a Budget. Now let’s talk about paying off debt.
On Becoming Debt Free
Fact: Americans carry $444 billion in credit card debt alone. So it should be no surprise that the Snowball Method of debt repayment is trending up 189% on The Pinterest 100 Report. Using this method, you pay the lowest balances, without regard to interest rates, while paying the minimum on your other credit cards. When you pay one loan off, you roll that payment to the next, and so on, hence the “snowball” effect on your debt. The theory behind the success of this method is that it creates momentum, which inspires you to pay as much as you can on your loans.
Another approach to paying off debt, known as the avalanche method, is to throw as much money as you can each month on loan with the highest rate of interest while paying the monthly minimum on your other loans. Then you move on the next with the highest rate until your debt is paid. The advantages are you pay less in interest and you pay off your loans more quickly. The disadvantage is you do not see progress as quickly.
Want a little extra help? No, I'm not offering to give you a loan, however, I did find this Huffington Post article that shares six excellent suggestions for apps to help you become debt-free so you can start saving more of your income.
Our Pinterest 100 report said money challenge pin activity was up 89%. So what exactly is a money challenge? A money challenge could be saving for any number of things such as a vacay or buying a home and allocating a set amount each month over a specified time frame to pay for it. For those who need motivation, Pinterest is there for you, even if you are working on a tight budget. And of course, we’ve got you covered in the app department. Magnify Money has an excellent post which even goes so far as to recommend a particular app depending on what you are saving for, be it a vacation, a car, or an emergency fund.
Investing for the Future
It’s encouraging to witness a growing interest in planning for the future. Investment pinning was up 295%, rating the most attention in the personal finances category. Knowing where and how to invest can be a challenge. It’s a jungle out there of stocks, bonds, mutual funds, real estate investment. Thankfully, there is a wealth of advice and tools available to help us find the way. Check out the inspiration from Investopedia, Bankrate, and the balance.
Achieving financial wellness and improving your relationship with money is worth your time and effort. By budgeting, saving, investing, and being debt-free, you can check off all your financial boxes. Reaching your goals will benefit your life and your family today and in the future.
More personal finance posts from our blog: 10 Effective Strategies to Turn a Spender into a Saver, Important Financial Numbers Everyone Should Know, 5 Ways to Improve Your Relationship with Money