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Money plays an important role in our lives. It gives us the means to meet our basic needs, pursue our passions, and achieve our goals. However, many people often wonder whether they make enough money to live comfortably and achieve financial stability. When you're faced with competing financial priorities, figuring out how to manage your spending, saving, and investing can seem overwhelming. Luckily, some basic but important steps can help you take control of your money today and put you on the path to financial wellness in the future. The most basic steps toward financial wellness include budgeting, managing cash flow and debt, building emergency savings, and implementing some automation in your savings.
Financial wellness is the process of developing healthy and stable financial habits with your finances, now and in the future. Taking the following steps can help reduce your stress and put you on the path to financial well-being.
1. Start with a budget
The first step to achieving your financial goals is knowing where your money is going. A budget gives you the ability to make sure your savings and spending are in line with your priorities. There are many ways to make budgeting easier. You can use a spreadsheet or pen and paper, and there are also apps and programs available to make the job easier. Regardless of how you choose to budget, you'll want to list your monthly expenses, including fixed costs like mortgage or rent, student loan payments, electricity, internet; variable expenses, such as groceries, entertainment, and travel; and irregular expenses such as some health care costs or home repairs.
2. Put away money for an emergency
When it comes to financial health, one of the most important steps you can take is to create an emergency fund. Set aside money in an emergency fund so you can handle unexpected life events without affecting your budget or long-term savings strategy. While investing can be an effective way to increase your savings, you may want to consider keeping your emergency fund in a savings account, checking account, or money market account. These accounts can provide you with lower-risk investments and easy access to these funds when needed. If you need to access your emergency savings, remember to add money to the fund afterward.
3. Make your saving automatic
One of the best ways to help you stay on track with your savings and investing plan is to automate contributions. Automation saves time and does not require constant work. So once you're set up, you can move toward your contribution goal without any extra effort. It also takes the emotion out of investing, helping you stick to your plan despite market ups and downs.
4. Take advantage of financial education and tools.
You don't have to manage your finances on your own: there are many ways to get help. For example, many employers offer financial wellness tools and training programs to help their employees set goals and identify specific, incremental steps to achieve them. Some employers offer significant financial assistance, including matching retirement contributions, student loan repayment, tuition reimbursement for additional education, and other benefits.
5. Boost your earning power
When it comes to saving and paying off debt, it can be difficult to find the money you need to reach your goals. The amount of your income is an important factor in your financial results. So it makes sense to consider your income as part of your overall plan. You can increase your earning potential. Investigate additional training to improve your career prospects. Many employers offer training programs or tuition reimbursement to support your continued education. Some people increase their income through a side hustle, a second job, or a small business. Finding ways to make more money may not be easy, but it can help reduce stress and increase your financial autonomy.
Source: T.Rowe Price