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Monday, July 24, 2017

Kale is Not the Only Answer

There are many dimensions to being healthy. When you talk about healthy living, we may think about what we eat, our level of activity, and mood . But how often do we consider how our financial health affects on our life?

We have all heard about relationships that falter due to “money issues” and the physical impact of worrying is well documented. Chronic worrying can cause physical illness and it can affect your life so much, it interferes with eating, activity, relationships, sleep, and job performance. Sustained levels of anxiety are known to boost levels of the stress hormone cortisol in our system, which puts us at a greater risk for illness, and depression. It can also cause us to seek the temporary relief of drugs, alcohol and over eating.

Leading causes of financial “dis-ease” are unhealthy levels of debt, unstable income, limited savings and living beyond our means.

When you workout it’s unlikely you ignore whole muscle groups which, as you may know, can increase the possibility of injury. But according to Vanguard’s annual report, How America Saves, the median account balance for 401(k) savings is about $29,500 which represents an income of only $1,200 a year!  Of course statistically, those balances grow with age and income, but no matter what your age, your financial health is an important part of your healthy living plan.   This is not a “muscle group” you can ignore!

Start with a financial weigh in or check-up and then create your own plan for “Financial Fitness”.

·         How much does it cost to be you? Track your spending for one month so you can see where your money goes. 

·         Divide your expenses into “have to’s” and “want to’s”. “Have to’s” are thing like rent, utility bills, and insurance premiums; “want to’s” are things like eating out and entertainment.  Make no mistake about it, my gym costs are a “have to”.

Evaluate your debt and determine what percent of your monthly income is going to pay debt and then - cut the fat! Just like fine tuning what you eat so you can be healthy and feel better, you can adjust where and how you spend your money.

Make a plan to pay down debt. If you have more than one credit card with a balance, and you pay amounts greater than the minimum required, consider paying all the extra dollars to the card with the highest interest rate or highest balance. This will help you pay off your debt sooner and save you money in interest expense. Once that card is paid off, add 100% of those dollars to the second card and watch your credit card debt trim down!

It takes 68 months to pay off $5,000 of credit card debt with an interest rate of 10.99% for a total of $6,718.

Are you giving away free money? If your employer matches the funds you put into your retirement plan, make sure you are at least putting in enough to scoop up all the free money.  Some employers match dollar for dollar up to 4%. If you saw a $50 bill on the ground, wouldn’t you pick it up?

Life happens and so do unplanned expenses. Emergencies like illness, job loss, car trouble, or home repairs are just a few of those little unexpected and expensive surprises. An emergency fund is a stash of cash you have set aside to cover these stressful and costly, surprises.

While saving money may not be easy, it is less painful than the alternative which could be using your credit card, having to move, or being unable to fix the car or a broken tooth! A recent study from FINRA Investor Education Foundation National Financial Capability Study (2012) found the following:
·         26% of people had unpaid medical bills
·         22% were overdrawn at the bank
·         10% took loans from their retirement account
·         13% had more than one late payment on their mortgage
·         56% of people in the U.S. don’t have enough of an emergency fund to cover three months of reduced living expenses.

Knowing you have the reserves to cover the unexpected, can reduce your stress level and may help keep you on your road to financial fitness.

Change can be hard, but not changing can be harder.