This week's installment of the #WellFitSpringClean is allll about the one thing that people generally want to avoid talking about: their finances. BUT we've made it [as] fun [as we could]! Well.Fitter and badass babe Kathryn Budnik is our guest author for this blog post and details how to give your bank account + budget a thorough spring cleaning below. ENJOY!
"According to a 2016 GOBanking Rates survey, 69% of Americans have less than $1,000 in their savings accounts and 34% have no savings at all! As a credit analyst, I can assure you this survey is accurate.
The source of the problem is simple – we spend more than we make. With easy access to credit cards in a world obsessed with consumerism, it is no wonder we find ourselves in this situation.
The good news is that all of this can be corrected and the best time to address the situation is NOW! Below are three key suggestions for improving financial health:
Create a Budget
Here’s an easy way to start the process:
1. Identify all sources of income
2. List expenses – if you have bills or receipts this may be a good starting point to set an average
3. Break expenses into two categories – fixed and variable
Fixed - expenses that do not change – such as: mortgage/rent, insurance, auto loan, etc.
Variable – expenses that fluctuate – such as: dining out, utilities, clothing, etc.
Total your expenses and determine the surplus / (deficit)
Throughout the month, tally how much you spend in each category – if you overspend in one area, reduce spending in another.
It is widely suggested that a rainy day account is maintained with at least three – six months’ worth of household operating expenses. If you are not there yet, manipulate your budget to allot for a monthly savings account.
Save for Retirement
How much you need to survive in retirement is related to life expectancy and lifestyle. I stress the importance of the time value of money as it is nearly impossible to catch up later in life than to save a little along the way starting at a younger age.
Most employers offer a tax-deferred retirement savings plan such as a 401(k) or 403(b) and will even match up to a certain amount. Self-employed individuals may also contribute into a SEP IRA. The benefits of this include reducing taxable income and free money from your employer.
In addition to the Traditional IRAs noted above, individuals may also contribute annually to a Roth IRA. In contrast to a Traditional IRA, a Roth IRA is not tax-deductible. Contributions must come from income which has been taxed; however, taxes are never again paid on transactions when retirement age is achieved.
Manage Credit Cards
According to a 2016 NerdWallet survey, the average American household has $16,748 in credit card debt. With interest rates in the double digits, this easy to rack up debt is unforgiving. The following are some tips to manage credit cards:
1. Limit purchases to those you can pay off in full each month (refer back to your budget!)
2. If this is not attainable, pay more than the minimum payment requirement which will ensure the debt is retired faster
3. Make your payment on time to avoid late fees and negatively impacting credit score
4. Keep your balance below 50% of the limit to maximize credit score
5. Check your statement monthly for fraud and errors
As a take away, I hope reading this will help empower you to take control of your financial health! As one last parting bit of advice, I urge you to track your progress on short-term goals. Once you see the change, the results will keep compounding, like interest!"
Questions, comments, tips on how you do your personal accounting like a boss? Let's hear 'em!
AND don't forget to share your progress in the #WellFitSpringClean over on social media using the hashtag (there might even be a little gift for those that participate!)