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4 Steps to Improving Your Financial Health

4 Steps to Improving Your Financial Health

Written By Dexter McDonald * According to recent data, 76% of Americans are living paycheck to paycheck.  Which means not only are we not saving for the future, we are barely making ends meet in the present.

Fewer than one in four Americans have enough money in their savings account to cover at least six months of expenses, which would barely be enough to help cushion the blow of a job loss, medical emergency or some other unexpected event, according to the survey of 1,000 adults. Meanwhile, 50% of those surveyed have less than a three-month cushion and 27% had no savings at all.

Online lender CashNetUSA said 22% of the 1,000 people it recently surveyed had less than $100 in savings to cover an emergency, while 46% had less than $800. After paying debts and taking care of housing, car and child care-related expenses, the respondents said there just isn’t enough money left over for saving more.

Can we break the cycle of living paycheck to paycheck? I think it is very possible but we must commit to change. In addition if we want to live the best possible life within our means we must first take the time to determine what our means actually is.

In most Western cultures the rich or upper class controls most of the wealth. We’ve all heard the cliche “the rich get richer”. Well, most cliches are based on truth and the rich do know exactly what to do to increase their wealth. The rest of us have to figure out how to get our piece of the pie and I believe as a community we can do this.

In order to get our piece of the pie, I believe that everyone must take four important steps in order to improve their financial health:

  1.  We must improve our financial literacy 
  2. Assess our financial health 
  3. Develop a plan for improving our financial health
  4.  Continually seek out current and relevant info about improving our financial health

 

Improving our financial literacy

As we begin the process of improving our financial health, it will be very important to improve our financial literacy first. If we are not willing to do this it will simply make the other three steps more difficult.  Imagine not been able to speak Spanish for instance and you visit a country where only Spanish is spoken. Would you be able to survive? You probable would but it will not be as easy as if you spoke the language.

A recent survey by freecreditscore.com on credit and finance indicates that many Americans still need to understand both. Fortunately there are plenty of free resources available. It does not matter if you are a tween or teen, college student or retiree we all need to make a concerted effort to improve our financial literacy. As a result, I have listed several resources and a brief description about the service each resource provide to get us started on the road to better financial health.

The American Institute of Certified Public Accountants 360 Degrees of Financial Literacy helps people to understand their personal finance through every stage of life. It is a national volunteer effort of the nation’s Certified Public Accountants to help Americans understand their personal finance and develop money management skills. It focuses on financial education as a lifelong endeavor- from children learning about the value of money to adults reaching a secure retirement.

The Alliance for Investor Education a non-profit organization of 18 associations, government agencies and self-regulatory bodies that are leaders in investor education/financial literacy. The Alliance for Investor Education is dedicated to facilitating greater understanding of investing, investments and the financial markets among current and prospective investors of all ages.

Choose to save is sponsored by the Employee Benefit Research Institute and the American Saving Education Council. The Emmy and Telly award-winning Choose to save national public education and outreach program is dedicated to rising awareness about the need to plan and save for long-term personal financial security.

Money Smart sponsored by the FDIC is a financial education curriculum designed to help individuals outside the financial mainstream enhance their financial skills and create positive banking relationships.

Experian is a global leader in providing information, analytical and marketing services to organizations and consumers to help manage the risk and reward of commercial and financial decisions.

Assess our financial health and developing a plan for improving it

Once we have improved our financial literacy our next steps will be to measure our financial health and coming up with a plan for improving it. As you may have guessed there are free resources for that too.

According to   Money Management International  this can be done in several steps. They provide a website that outlines a path to financial wellness and the program gives everyone the information and tools needed to create successful strategies for assessing and improving their financial health.

Step 1: Commit to change. The first and most important step in developing and following a financial plan is to examine your attitudes about money.  Are you ready to accept responsibility for changing your financial situation?

Step 2: Assess your financial situation.

Step 3: Clear out financial clutter. Getting your financial house organized is a great way to begin on your path toward financial wellness

Step 4: Set yourself up for success. While all members of a family should be aware of the family’s overall financial situation, choosing one person to conduct the day-to-day financial tasks is a good way to stay on top of things. Appoint a family CFO.

Step 5: Get copies of your credit report. Your credit reports can provide a snapshot of your overall financial situation. Reviewing your credit reports for accuracy can also help you to identify errors or fraudulent activity. Fortunately, it is easier than ever to obtain copies of your reports.

Step 6: Clean up your credit report. If you find an error on your credit reports, you’ll need to know your rights. Your most effective weapon in dealing with the credit bureaus is the Fair Credit Reporting Act (FCRA). Legally, the FCRA protects you by requiring credit bureaus to furnish correct and complete information to companies requesting credit histories for evaluation

Step 7: Make your money count. To develop an accurate picture of the amount of money you will have in the future, take a look back.  Decide if your income will be from the same or from different sources and the amount of income you can expect to earn in the future.

Step 8: Identify your starting point. Calculate your net worth. This is as simple as comparing what you owe liabilities and what you own assets. Money Management International provides a tool for this.

Step 9: Take a debt test. Freedom from debt is an achievable goal for every family. The first step in regaining control is to take an honest look at your existing obligations.

Step 10: Set your priorities. Creating a list of needs and wants can help you establish your financial priorities

All the steps can be found here.

Another great resource for developing a financial plan is Mint.com. Mint pulls all your financial accounts into one place. Set a budget; track your goals all for free!

We have now discussed improving our financial literacy, assessing our financial health, developing a plan for improving our financial health however the journey to improve our financial health does not end there. We must continue to seek out current and relevant information in an effort to maintain and continually improve our financial health.

As a result, we invite you to continue to visit us here at Your Life Daily. Keeping in line with our mission of been the premier source of information, our staff will seek out the most current and relevant information and provide it to our community in a central location at www.yourlifedaily.com/YourMoney

Once we have taken the steps to improve our financial health and we know exactly what percentage of our income we have to spend on leisure, it is now time to maximize it by choosing to indulge in the experiences and cultivating the relationships that matter most us.

 

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