Assess Your Stability During Financial Literacy Month

Americans say their financial health is a top priority. Maybe a top source of anxiety, too, as three quarters of us admit to being stressed about our finances. Many of us have become financially unhealthy, or just not acquired the proper money management skills. But that can be remedied in April, which ushers in National Financial Capability Month (It’s a real thing: Congress proclaims it every year).

Financial capability and financial fitness go hand in hand. Fitness means effectively managing your money to meet your short-term and long-term needs and wants. The Financial Counseling Association of America (FCAA) says it involves handling your finances in a way that allows you to achieve your immediate and future goals. This includes both the things you need to survive and the things you desire to improve your quality of life.

Financially fit people know where they earn their money and where they spend it. They pay off debts, save for emergencies and retirement, and regularly evaluate their financial situation. Holistically, think of it also as financial wellness.

Here are some tips from the financial counselors about getting to where you know you want to be financially.

Create a budget (and stick to it).

Take some time to identify where your money comes from and what you spend it on. Whether written by hand, recorded on a computer, or managed in your online banking platform, having a list of your income and expenses can be useful. 

You can see where the minuses outweigh the pluses. If your expenses exceed your income, see what you can cut out. Then, track your spending each month, so you can see if you’re within your budget.

Put your earnings on automatic deposit.

Ideally, your paycheck is direct deposited to your financial institution. But earmark some of the money for a savings account. If a small portion of your paycheck goes directly into savings, you’re less likely to spend it. These small changes can make a significant difference in your financial fitness.

“Thinking you can go another year without an emergency fund is one of the biggest pitfalls I see,” financial advice author Todd Christensen told FCAA. “If you aren’t directly depositing something into savings, you will likely spend every penny you earn and end 2024 the same as you ended 2023 – in debt and without any savings.”

A good rule of thumb for how much money to keep in your emergency fund is three to six months of living expenses. Emergency savings will protect you from debt if unexpected problems arise. 

Auto deposits also make sense for workplace retirement savings programs such as 401k and 403b plans. And don’t forget to put your mortgage and loan payments on auto pay. It’s easy and will prevent any forgetfulness around when to mail a check or make a transfer to the lender.

Reduce your debt load.

Debt can cause significant stress and physical and mental ailments. It can also cause people to miss out on vacations, family time, or a better quality of life.

“Overwhelming consumer debt equates to major opportunity costs,” said Christensen. Households that are using their entire current income to pay off past purchases will miss out on a lot.

Separate your short-term and long-term financial goals.

Set a budget for a vacation, a down payment on a house, or a needed car, and begin saving and investing. Planning for the future is a wise practice and reduces overall monthly expenses when done well.

When planning for a large expense, reframe your thinking. “Car payments, just because they’re the norm, are a big pitfall. Big car payments are about the fastest way to get a household into financial trouble,” said Christensen. 

Review your credit reports.

With the prevalence of identity theft and the changing nature of people’s credit, it is important to know what’s on your report. Your credit score also is key to whether credit will be granted to you, and at what rate. 

Bay Federal Credit Union, bayfed.com, can link you to a site that will secure a credit report. Once yearly looks are free of charge.

Bay Federal, a sponsor of this page, also offers advice and guidance on pretty much everything tied to finances – from checking and savings accounts, to loans and credit cards, investments and financial wellness. They even provide a link to GreenPath Financial Wellness, a national non-profit counselor for financial services. 

Take these tips. They’ll sharpen your financial capability, and wellness. And they might dampen your tie to another April observance – National Stress Awareness Month.

By Steve Dinnen