For the past few months, I’ve been focusing a lot on my physical wellness. By creating daily exercise and diet habits, the process of taking care of my health has become a lot easier.
I learned a lot about this goal-setting and habit-stacking process when I was working on my family’s financial wellness. It’s amazing how when one area of your life has been improved, it’s so much easier to take on another area. I found this to be true with my finances and now with my physical health.
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Solving my money problems didn’t always come easy to me though. Here are some of my “favorite” money blunders:
- Buying a home I could not afford (and having to sell my DVDs on eBay to pay my heating bill)
- Borrowing money from my student loans to buy my wife’s engagement ring
- Refinancing our home and then selling it shortly after (all-in-all a $13,500 loss based on interest payments and refinancing fees)
The bright side to these money mistakes is that I learned a lot. Given that I don’t like losing money or being financially strapped in general, I vowed to myself and my family to avoid these situations at all costs.
Here are five ways I’ve worked to develop a life of financial wellness for our family.
Creating an Emergency Fund
It’s an incredible feeling to have money in the bank. In good and bad times, it makes you feel secure knowing that if things get worse you are covered. This is especially true when you have a home and a family to take care of.
To help our family feel some true financial wellness, my wife and I agreed that six months of expenses set aside in an emergency savings account was a smart move for us. There have been years when we haven’t touched this money at all and other years when $5,000 was needed immediately.
Determining how much to have in your emergency savings is completely personal. For some, six months of expenses in cash sounds too conservative while others may prefer a year of expenses or more. Find what works for you and stick with it. Either way, having cash in the bank for emergencies is a smart move.
Designing a Family Budget
For the past 10 years, my wife and I have met monthly for our “Budget Party.” The get-together has evolved over time, but in its heyday we would get some wine and pizza and do three main things together:
- Review our spending and budget from previous month
- Plan out our budget for the upcoming month
- Review our financial goals and track our progress on those goals
Additionally, this set-aside time would allow us to talk about upcoming events (weddings, soccer games, birthday parties) and allow us to create our schedule for the month. Not only were we budgeting our money together, but we were budgeting our time. After all, they are both finite resources.
Fintech has changed rapidly over the last decade, too. I wish we had access to Personal Capital’s free financial tools when we started. Since it automatically syncs up your transactions by being connected to your bank accounts, that would have saved us a ton of time!
According to a recent survey, 55% of Americans aren’t investing. One of the main reasons is that they are waiting to make more money. This can be a slippery slope because as we make more, there can be a tendency to spend more as well.
That’s why I’m a big fan of automated investing. This is the process of deciding how much you can allocate each month toward investing and automating it. If that’s $50 per month to start, great! And if it’s more, even better.
We used this process when we started our investing journey. We weren’t making as much as we wanted but we decided we wanted to be investors anyway. Over time, we forgot we were even contributing to our investment accounts each month because it became our way of life. We didn’t know what money we were missing because we were used to living without it.
As time passed and our incomes grew, we would add more money to our automated investing. This financial wellness habit helped us to become millionaires in our 30s.
Giving with the Family
Speaking of stashing away cash for a purpose, our family enjoys giving as well. It warms our hearts to be able to give to family, friends, neighbors, and charities and causes we feel passionate about.
With that in mind, another financial wellness habit we have is allocating 10% of our monthly budget toward giving. Here’s how we break it down:
- 5% towards charitable giving
- 4% towards future family gifts (cash, presents, etc.)
- 1% towards random acts of kindness (in our community)
When I’m feeling overwhelmed or down on myself, I feel much better when I give to others. This can be with my time or my money. It takes me out of my “woe is me” mindset and into a mindset of community and love.
My favorite part of all of this is that we involve our kids in the process, too. They are learning at a young age that giving is a part of financial wellness. When you’re giving, you’re putting goodness back out into the world.
My wife and I both love vacations. Getting out of town and chasing the sunshine makes us both happy. It’s one area where we see eye-to-eye when it comes to how we use our money.
Given this, a financial habit we both enjoy is socking away 10% of our income every month for vacations. This way, we’re virtually guaranteed to have the money we need to fund our next getaway.
Now vacations may not be your thing, but prioritizing saving for a purpose could work well for many other things. Do you love going to live events? How about always having money to make the holidays special? Examine your passions in life and sock away the cash to make it an ever-present reality.
Ready to prioritize financial wellness in your life? You can start with a holistic view of all your financial accounts — from checking and savings to your 401ks and mortgage — by signing up for Personal Capital’s free money tools.
Once you link your accounts, the real fun starts.
Personal Capital compensates Andy Hill (“Author”) for providing the content contained in this blog post. Compensation not to exceed $500. Author is not a client of Personal Capital Advisors Corporation. The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.