My Financial Wellness Journey

So many books and articles have been written about achieving financial wellness.?I’ve come a long way in my financial wellness journey, and I remember when I was up to my eyeballs in debt, living month to month.?The advice in the articles seemed impossible and complicated.?Common advice is to have six months’ salary in the bank for a rainy day.?How on earth was I supposed to save that much when I was barely making it month to month??Impossible.

Not impossible.?The trick is to break down the advice and just start with three steps.

The first step is usually called, “Create a budget”.? The stringency of a budget never worked for me. What worked was to understand total monthly income (how much money you’re bringing in) and total monthly debt (how much money you’re spending).?Make sure you’re not spending more than you’re making each month.?It’s called living within your means.?It doesn’t make any sense to take any other step without first figuring this out.??

Your monthly credit card and bank statements can provide a clear picture of how you're spending your money. It's crucial to review these statements and reflect on your spending habits, asking yourself if you truly want to allocate your funds in that manner. This exercise can be very enlightening.?I may randomly buy a coffee on my way to work every morning but if I sit down and figure that my $6 daily coffee actually costs me $120 each month, I might realize that I want to spend that $120 on something different.?After all, my workplace does provide free coffee. . .

When I really thought about it, I realized that two people don’t need a 90 gallon garbage can picked up weekly.?We never filled it.?We could downsize to a 35 gallon can and save money on the weekly bill.?Here is an article showing how another person saved on their monthly expenses:?https://www.cnbc.com/2021/12/04/5-tips-for-saving-money-on-entertainment-expenses-as-a-college-student.html.

Once you’ve cancelled subscriptions that you no longer use, decided where else you want to save and confirmed that your income exceeds your monthly expenses, the next step is to make sure you have some money in savings.?According to DemandSage, 15.5 million people were laid off in 2022 and 28% of people were laid off in the past 2 years.?I’ve been involved in multiple reorganizations and workforce reductions and am constantly shocked at how unprepared so many people are.?Having at least a little financial buffer makes all the difference to stress level and standard of living when you’re looking for your next job or dealing with a financial surprise that came up like an accident or unexpected bill.

Here's how I started saving: I set up two accounts – a checking account and a savings account.?My entire paycheck went into my checking account.?At the end of the pay period, I moved whatever was left in my checking account over to my savings account.?Sometimes I only had $30 to move over to savings.?Sometimes it was more.?Whatever was left at the end of the pay period was swept over to savings.?I didn’t touch the money in my savings account.?I couldn’t believe how quickly the money in savings increased using this method.?Once I had several thousand dollars in savings, I then focused on the third step, which is paying down debt.??

I wrote down the dollar amount of each loan, as well as the interest rate and required monthly payment.?My strategy was to pay off the smallest debts first.?If I had two debts that were roughly similar in size, I would pay off the debt with the highest interest rate or required monthly payment first.?Once the debt was paid off, I added the monthly payment amount that had been freed up to focus on paying off the next debt.?The more loans that were paid off, the more money was freed up to pay down remaining debt.

It’s incredibly important to get out of credit card debt.?You’re charged more on credit card interest than you’ll make in standard saving or investment accounts.?According to a study from WalletHub the average credit card interest rate is nearly 23%.??BankRate notes a 0.24% APY for an average savings account.?You save significantly more money when you get out of debt than if you keep the debt and put money in your bank account.?Pay off the debt.??

It took several years for me to get out of debt and to have a couple thousand dollars in savings.?The feeling of freedom was intense.?I never want to go into debt again.?Of course, I’ve had to take out loans since then, but I’ve been able to do it in a responsible, methodical way.?And I’ve been able to build complexity into my financial plan, including investing in a home, 401K and other building blocks.

I've made a conscious plan to save for future expenses. A significant upcoming expenses is purchasing a vehicle. In the past, I used to finance the entire cost of the car.?Now I aim to make a down payment so that my monthly payments will be lower, and I can save on interest. To achieve this goal, I have a separate savings account solely dedicated to the car. I contribute at least $500 each month into this savings account - the same amount I was paying for my previous car loan.

The more financial freedom you have, the more you can save on monthly expenses. For example, by opting for a higher deductible of $2,000 instead of $500, I've been able to reduce my insurance premium costs. This option wasn't available to me before because I didn't have savings to cover a higher deductible.

I wanted to share my personal story and break the process down into small, manageable steps.?Step 1: Make sure your monthly income is higher than your monthly debt.?Step 2: Save up a small nest egg so an unexpected event doesn’t destroy you financially.?Step 3: Pay off your debts one by one, starting with the smallest.?You can then focus on building from there.?I had $30,000 of credit card debt when I was in my 20s because I had a lot of fun and didn’t worry about the future.?I had a car loan and a motorcycle loan.?I wasn’t making a lot of money.?I was living month to month.?If I could get out of debt from that starting spot, so can you.?For years, I have lived debt free except for a mortgage payment – which I aggressively pay down each month.?What glory!