Financial wellness is a concept that is more than just having enough money to meet your basic needs. It's about understanding and managing your finances in a way where you'll be able to live a life of security and freedom. In a world shaped by consumer choices, unexpected events could unfold which emphasizes the importance of being financially prepared and flexible. As we celebrate Financial Wellness Month, here are five tips and strategies to empower your wealth.
1. Create a spending plan
Has there been a time where you found yourself wondering where your money went after a nice invoice payment? A spending plan, also known as a budget, is going to be your best friend when it comes to organizing and saving money. With a well-structured plan, you’ll be able to track and better understand your income and expenses. Get started by assessing your income sources and calculating your monthly expenses. After that, categorize your expenses by dividing them into groups. Mortgage or rent, utilities, team member or contractor expenses, office supplies and other essentials for operating your business are a good baseline to start at. Figure out how much you’re comfortable with putting towards each expense category and stick to those limits. That way, you’re not overspending and you’re also making sure you’re saving enough to reach your financial goals. An added bonus is that every month that you’re able to stick to your budget, you’ll reinforce discipline and boost your confidence. Any adjustment to your expenses as small as $50 a month can go a long way ‒ a simple yet effective game plan for your money!
2. Keep records and track your credit reports
Maintaining a record and consistently tracking your credit report plays a huge role in your financial wellness. Your credit is defined as the ability to borrow money, coupled with the commitment to repay it in the future with added interest. The report is a record of credit history and is used by lenders and landlords to assess your creditworthiness. Credit reports contain your personal information, credit limits, account balances and other performance data. Track your credit report so you can identify any errors or fraudulent activities that can negatively impact your credit score. You should also regularly monitor your credit health and see if there’s an area for improvement to build a stronger profile. This is especially important when you’re applying for a building loan, starting a business or renting an office. Everyone is entitled to a free credit report annually, so there's no reason not to take a look! Moreover, you can use an app like Credit Karma to easily check your credit score and have notifications update you on any changes or potential issues. Feel good about your score as it skyrockets and have your finances in order!
3. Prepare for financial emergencies
Financial emergencies can happen at any time and being prepared is something you can do right now. An unexpected change in your clients, damage to your office or even a natural disaster strike? These emergencies are rare, but not impossible. It’s better to be prepared than not when the time comes. The first goal is to set aside a safety net of three to six months' worth of operating expenses. With a financial cushion to fall back on, you can sleep better knowing that you’ll be prepared for any unexpected curve-balls that business or life may throw at you. Another step is to take a moment to check and update your insurance to ensure that you have adequate coverage for your health, property and other valuable assets. All things considered, seek assistance when needed if you find yourself in a financial crisis. Local non-profit organizations or counseling services can provide guidance and support during challenging times. With the comfort of knowing you’ve padded your savings for any unwanted surprises, you’ll be able to sleep comfortably at night, worry-free.
4. Save for retirement
Planning for retirement is a long-term goal that requires strategic and thoughtful planning. Once you’re comfortable with your emergency fund, you should start saving for your retirement. The earlier you start, the more time your money has to grow. There are many options for you to take when it comes to planning. Start by assessing the benefits you can access as a self-employed individual. From there, look into options you can provide as an employer. While most people are familiar with options like 401(k) plans, pensions, IRAs and Roth accounts, as a business owner, the available options may vary. You will want to reach out to a qualified professional to weigh your options. Be sure to consider costs and requirements for your team. By being proactive, you can help prepare for your future and your team's.
5. Pay off your debt
Even with all the hard work you’ve put into saving money, the biggest obstacle to achieving financial stability can be the debt that your business owes. A small debt can quietly grow into a big problem if left alone and could derail any financial plans. You’re first going to need a clear overview of your debt situation. Begin by collecting details about all your debts, such as the amounts you owe, any interest rates and the minimum payment required. After you have a clear picture, you can utilize the snowball method or the avalanche method. While the snowball method is to address debts from smallest to largest, we typically recommend the avalanche method which helps you save more money in the long run by prioritizing paying off debts with the highest interest rates first. After eliminating your debt, you’ll be liberated from the weight of debt and can use your newfound freedom to pursue saving or investing for a brighter financial future.
The year has just begun and is an open opportunity for you to take care of your financial future. However, these tips alone will not help you achieve financial wellness. It’s going to take discipline, knowledge and consistent effort. Fortunately, it’s all about taking the first step. Every step counts and before you know it, you’ve reached your first milestone! You’ll be able to control and enjoy the benefits of financial security, freedom and peace of mind. Start today and make smart money moves that will set you on the path to building a strong financial foundation. Join our exclusive Facebook community Small Business Financial Freedom Fundamentals to learn more tips and resources to help you achieve financial freedom!
Author: Gary Wong
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