The good news is if you’ve already created a monthly budget (or are working on one), you’re taking the first step toward financial wellness. Next, you’ll want to turn your attention to saving. According to recent studies, “28% of Americans have savings below $1,000.” This situation affects all generations: 32% of Gen Z, 31% of Millennials, 27% of Gen X, and 20% of Baby Boomers have similarly low savings.
To start saving, think of it as “paying yourself first.” Contemplate the costs that “future you” will have, such as retirement or even expenses later this year. Planning for things like new tires or a vacation with your family can become feasible goals with a saving strategy. If you adhere to the 50/30/20 rule of budgeting, 50% of your income covers needs, 30% covers wants, and 20% goes into savings.
Adjust these percentages to fit your situation as necessary. The simplest way to save is to make it automatic. Set up automatic transfers from your paycheck to a savings account. This is where understanding the main differences between a checking and savings account can help you choose the right option for your savings goals. Checking accounts are best for daily transactions, while savings accounts typically offer better interest rates and are designed for building your savings over time.
For example, allocating $50 from each bi-weekly paycheck results in saving $1,300 in one year without factoring in interest.
Boosting your financial wellness
Building an emergency fund is a critical strategy for financial wellness.
It’s a savings set aside for unexpected expenses such as home and car repairs, medical bills, or loss of income. Emergencies happen at the worst times, but having a fund can aid you significantly. The goal for this fund varies based on your unique situation, and starting small can still make a difference.
A good way to bolster your emergency fund is to add extra money you receive outside your regular income, such as tax returns. Allocating part of these funds towards your emergency savings will benefit you in the future. Wellness is not just physical or emotional; financial wellness is just as crucial.
Secure financial well-being involves managing money to meet your immediate needs while planning for future financial goals. Taking these steps can help ensure your long-term financial health. For personalized advice, consider consulting a trusted financial professional.
