Our Thoughts

Three Steps to Financial Wellness: Maintaining Money Health

By: Alexis Grason and Baylee Alerding,

Maintaining a healthy lifestyle is one of the most important things we can do for ourselves. We do our best to eat right, get enough sleep, and stay active because we know these things are essential to our wellbeing. But what about your money health? Getting your financial health in order and keeping it that way may seem overwhelming, but it doesn’t have to be. 

Think of these three pillars as your financial Fitbit holding you accountable for healthy money habits.

Monitor Your Bank Account Like You Monitor Your Diet

Monitor-Bank-AccountIn a perfect world, we could eat whatever we wanted all the time and never worry about things like calories, saturated fats, or sugar. Much like a well-rounded diet keeps us balanced and energized, a spending (and savings) plan can provide the same balance for your bank account and desired lifestyle. 

Your budget diet should be:

  • Realistic – The word “budget” shouldn’t make you cringe. It should be unique to you and align with your habits, values, and goals — so it’s achievable. It should serve as a schedule to help you get the stuff you care about done. Here’s a simple way to get started. 
  • Flexible – It should be diligently followed but also provide room for splurges. We all deserve to indulge in a slice of chocolate cake occasionally. You know your favorite splurges for eating, you should know your favorites for spending too. Insights from one New Yorker’s spend trackingIs $20 your new $3? 
  • Adaptable – Life happens. Your budget needs to cover routine expenses and still be able to accommodate unexpected costs – everything from family coming to town to medical bills.  
  • Revisited – Don’t forget to check in with yourself. Go back and review your budget periodically to make sure it’s keeping up with where you are today. If you receive a raise (make sure to avoid lifestyle creep!), change hobbies, move jobs or locations, or start feeling pinched, revisit to see what has changed!

The hardest part about budgeting (and dieting) is saying no to something you want. When you’re tempted, think about your long-term financial goals and let your head make the decision, not your heart. 

Dream Big

A good night’s sleep not only feels great, but it’s also essential to the health of our minds and bodies. Dreaming helps you distill all the tiny details of your day into memories, themes, and ideas. It’s important that your daily spending and saving ties in with your long-term financial dreams as well. 

  • Identify your long-term goals. This one is tough because it’s hard to envision your future self. Take time to ponder what’s important to you and then make a list of your priorities for your money: needs, wants, and wishes. 
  • Back into metrics to see how your everyday habits are helping you get there. 
  • How much do you need to be saving for retirement?
  • How much do you want to save for annual fun expenses like travel and hobbies? 
  • How can you spread out your savings into tax-deferred, tax-free, and taxable portions? 
  • How can you max out your employer-provided plan? Make sure you’re not leaving a company match on the table, and you know the basics of 401ks 
  • How can you increase your annual savings? 
  • Make sure you’re on the same page as your significant other. This one is key. Establish common ground for your shared vision of the future and day to day sacrifices to get there. You can find financial conversation tips and topics for couples here and here. 

Commit to be Fit

Financial-FitnessHaving a workout plan helps you stay on track and use your time at the gym efficiently so you can reach your goals faster. If you don’t have the tools or knowledge (or time!) to create an effective plan, you might need to consult a professional trainer to help. 

A financial advisor can help you create and implement a plan for your finances by building your portfolio and optimizing your tax efficiency. 

Your plan should account for: 

  • Diversification
    • This is like the rationale behind your modified workouts after an injury. A twisted ankle may prevent you from running for some time, but it won’t stop you from lifting some weights. 
    • Having a range of different kinds of investments can stabilize performance. This means that no one investment will float or sink the portfolio. It’s designed so that all the asset classes work together in concert over time.  
    • Make sure that the level of anticipated fluctuations matches your timeframe and will allow you to sleep at night. 
  • Monitoring & Rebalancing 
    • Once you have a target in place for your portfolio, it’s time to watch the individual holdings and establish a plan for disciplined rebalancing. 
    • At FJY, our investment committee continually assesses our recommended investments based on a multitude of criteria. Have you identified the criteria to monitor carefully? 
    • The doozies that can lead to emotional, non-disciplined decisions are water cooler talk, “the next big thing,” and media scares, so how often should you check the news?  
  • Asset Location and Tax Efficiency
    • Create long-term tax efficiencies by making sure your savings are diversified from a tax standpoint. Digest the basics and then take it a step further. 
    • A solid team between your CPA and CFP® can execute synergistic strategies in your best interest.  
  • BONUS: Are socially conscious investments important to you? As this market continues to grow and increase its competitiveness, know it’s an option if you value that approach. 3 Strategies for Investing with Your Heart and Your Head.

Staying healthy requires time, attention, and discipline–and so does your money health, but the rewards are well worth the effort. Expand healthy habits to mean more than what is good for your body. Build your financial wellness by gaining confidence that you have the right ecosystem of habits for your wallet.