Finances can be a significant source of stress, with 77% of Americans feeling anxious about their finances. But when you establish financial wellness and can meet your financial obligations, you feel confident about your decisions, your spending supports your goals and you’re prepared for future emergencies.
These five simple steps can help you gain control of your financial situation, reduce the stress associated with finances and make it easier to meet your long-term goals.
Build an Emergency Fund Before Investing
It’s easy to confuse an emergency savings fund and investing, but the two are different categories of money. Invested funds should remain there until they’ve matured and grown. You can incur penalties if you invest and withdraw the money early.
If you have extra money, investing is a great way to plan for the future — but only if you have emergency savings set aside first. Setting aside three to six months of cash savings in an emergency fund to cover household expenses is recommended.
Track Your Spending
Tracking your expenses is one of the most critical factors in creating a smart financial plan and sticking to it. Without knowing how much you spent each month, it’s impossible to determine if you’re overspending. Apps like Mint help categorize and track spending all in one place to see where you may need to cut back.
Tracking your spending is also important for your taxes, so you should organize receipts, statements and records for tax purposes. If you donated to Crawford Heritage Community Foundation or another charitable organization, be sure to confirm it qualifies for a tax deduction and keep a record to submit when it’s time to file tax returns.
Focus on Paying off Your Debt
Debt can cause stress and anxiety and potentially even harm your future finances. There are two basic methods to tackle debt. One is the “snowball” method, where you pay off the smallest debt first and then the next, continuing until all accounts are paid off.
The other is the “avalanche” method, paying the debt with the highest interest rate and working downward. It helps you pay less over time since you’re tackling high interest first. Both methods can be successful, but finding what works for you and your budget is what matters most.
Follow a Budget That Works for You
Everyone talks about budgeting, whether it’s their time or money, but not many people follow through. Following a budget organizes your finances, keeps spending in check and saves money. The 20/80 rule is a straightforward approach to budgeting, where 20% of your take-home pay goes into savings and the remaining 80% goes toward expenses.
A similar budgeting style is 50/30/20, where 50% of your take-home income goes toward needs like housing, gas and groceries, and 30% is spent on discretionary items. The final 20% goes toward savings or debt repayment. No matter your financial situation, it’s important to have a plan in place to ensure you’re prepared for the unexpected.
Plan Early for Retirement
When you’re young, retirement seems far off. However, it’s the best time to start saving, because the sooner you begin, the more time your money has to grow. A retirement calculator can help you better understand how much you need to start saving to hit your goals.
You should take advantage of your employer’s retirement plan, such as a 401(k), 403(b) or other relevant plans, and maximize its matching opportunities. You can also consider investing post-tax dollars into a Roth IRA or pretax dollars in a traditional IRA.
As you evaluate your financial wellness, consider if there’s room to support a charity you’re passionate about with monetary donations. While it can be hard to decide which organizations to give to, nonprofit organizations like Crawford Heritage Community Foundation can make the process easier and more effective. We can distribute your legacy donation to specific nonprofits, or you can allow us to decide who would benefit the most. Your community foundation is one tool for making a difference with your charitable giving, whether you want to support organizations locally, nationally or even internationally.
Whether you are a concerned citizen, a community leader, were born and raised in Crawford County or simply want to make a difference, the Crawford Heritage Community Foundation is here to help provide unbiased guidance. To learn more about how the Crawford Heritage Community Foundation can support your philanthropy efforts, contact Executive Director Christian Maher or donate now.