Most people know what April 15thmeans – Tax Day. However, did you also know April was Financial Literacy Month?
According to financialliteracymonth.com, Americans have more than $2 trillion in consumer debt and many people are living paycheck to paycheck. Because of this, April has been dedicated to educating Americans about their personal finances. Also, Money Management International, the gurus behind Financial Literacy Month, has created a 30-step plan to financial wellness. This plan can be altered to fit any person and any age. Let’s take a deeper look into the various steps.
Step 1: Like with any new budget or financial plan, commitment is the first step. In order to get financially healthy, you must stick with a plan from the beginning to the end. When you get wishy-washy, that is when things go downhill. Think of it like eating healthier – you can’t eat sweets all day and expect to suddenly love fruits and veggies.
Step 2: On the website for Financial Literacy Month, they have a short quiz to determine your current financial situation. It is always important to know where you stand before beginning.
Step 3 – 9: You may have already done this step for tax time, but it is a step that needs to be done often – clean out your clutter. I’m guilty of letting receipts pile up or paycheck stubs sit in one spot for a while. As a general rule, receipts such as grocery or credit card, can be destroyed after you record them in your budget. As for paycheck stubs, check them against your W-2s. if they match, you can destroy them. If not, request a W-2c, which is a revised W-2. In addition, these steps help prepare you for taking the challenge and making your financial change. Take a look at your credit report and exactly where your money is spent. Using an income worksheet can help you determine what to keep and what you can eliminate in your budget. Know your starting point for financial wellness by calculating your net worth. All you have to do is compare what you owe versus what you own. To simply figure this out, it is recommended you use a net worth worksheet. Lastly, have a clear understanding of your debt and how close you are to paying it off.
Steps 10 – 18: To obtain financial wellness, you need to set SMART goals and analyze your financial priorities. SMART goals are goals that are specific, measurable, achievable, rewarding, and trackable. These goals should be short and long term, allowing you to have small accomplishments along the way to reaching a bigger goal. Your goal might be to have a certain amount of money in savings at a certain time, a big purchase or vacation, or paying off your debt in a number of years. Always be realistic with yourself and understand there will be unexpected expenses that pop up. Financial experts suggest having at least three to six months of living expenses saved for emergencies. While this might be hard to do if you are living paycheck to paycheck, always try to set aside part of your income for savings. You never know when you’ll need it. Other ways to add money to your savings is through an automatic withdrawal by your bank from your checking account into a savings account, downsizing, or turning a hobby into a revenue stream.
Steps 19 – 25: These steps take your planning a little further and a little deeper. Document your spending, expenses, and deposits. This is where an expense worksheet comes in handy. List your expenses or potential expenses and then see where you can cut down.
Steps 26 – 30: Every so often, you need to do a financial wellness check. During this, look at your various insurance policies, assets, and credit. Also, think about who can help you meet your goals, such as a financial planner, credit counselor, or tax advisor. Using these services might give you the opportunity to start utilizing unused benefits.
For the month of April, make time to take a good look at your finances and pledge to become financially healthy! You’ll thank yourself in the long run. For more information about Financial Literacy Month, visit financialliteracymonth.com.