How to improve your Financial well-being: take control of your life the smart way!
Financial well-being has a longstanding effect on your physical, mental and emotional health. The strategies below will help you start taking control of your finances and improve your quality of life.
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If you are losing your mind with the rising cost of living and worried about bills, mortgage, credit cards, and not having enough money for retirement, you are not alone.
According to a recent study, 65% of Americans are stressed about money, and they are the world’s largest economy! Depending on your income level, the situation can be even worst.
But do you know that financial stress affects not just your pocket but also your physical health? At chronic levels, stress affects all systems of the body and can lead to complications like high blood pressure, heart diseases and even strokes.
Financial stress can also damage our relationships and affect our mood and overall mindset.
With so much at risk, it becomes crucial to establish and cultivate our financial well-being, which is what this post is about. Let me share with you the strategies I use daily to minimize the stress caused by money and take ownership of my general well-being.
Budgeting and spent tracking
If I could share only a single piece of advice that I learned at business school, it would be:
” You can’t manage what you don’t know.”
To properly control our finances, we need data to see what is happening with our accounts and evaluate our income and expenses to make better decisions. We need a tool to help us identify where we are spending our hard-earned money.
I tried in the past to have a spreadsheet where I added every expense I had in the month, calculated the spending per category, and checked against my budget. It worked for two months.
It became very time-consuming to keep, and when I had to create new expense entries, I struggled to remember the details.
Then I discovered Mint, and it was a game changer.
Mint helps me see data from all my accounts in one place, better understand my cash flow, and spend less than I earn, avoiding debt and increasing my savings. It has a web portal and also apps for android and iOS.
If you are not a heavy cash user like me, linking your debit and credit cards to Mint will let it automatically classify all your expenses, synced almost in real time!
On Mint, I define spending targets and budgets by several categories, and it provides me with accurate balances, both individually and consolidated.
How I use Mint
Here is how I created my budget on Mint:
- I linked all my accounts: checking, savings, all the accounts that I had money in and out, including my credit card;
- Mint imported the transactions and classified them into its categories and sub-categories; ideally, I would go back and check all of them, but if that becomes a burden and demotivates you, try to validate at least the last two months and reclassify as necessary;
- I defined a budget per category; going at the sub-category level can become complex to start, so try to keep it simple in the beginning;
- I developed the micro-habit to check Mint any time I think to make an expense to see if I have the budget for that, and at least weekly to see how things are going;
- As part of my budget, I defined an amount for savings. The actual number is not the most important at this stage, but the percentage of the income. You can aim for 10% and adjust as you get more familiar with the process.
- After two months, I got better visibility into my expenses and started to break down my budget into sub-categories, which led me to further savings;
- My wife has also access to the Mint app, and we review the spenses and cashflow together on a regular basis;
By understanding my spending habits and having a clear view of where I am spending, I can optimize a monthly budget that I will be more prone to stick to. This habit helped me start saving and keeping pace, which is my next topic.
Start saving money today!
Let me start bluntly: saving money has more to do with spending and investing habits than it has to do with income.
Of course, if you have a higher income, you will have more room to satisfy your basic needs and some of your nice-to-have ones, but by the end of the day, if you spend more than you earn, you will end up in debt and stress.
Ronald Read was a janitor and gas station attendant who saved 8 million dollars during his life. If you keep the habit, the time and interest compounds will do their job.
If you can save only 1% now and not 10%, so be it, as long as you stick to the rule of saving every single month.
You can set a goal for your savings, like a vacation trip (and Mint can help with that!), but you also need to consider saving for retirement.
A great option to start saving in Canada, including TFSAs, RESPs and RRSPs is WealthSimple (I will blog about those later). Make sure to select a plan that is aligned to your risk profile, and take advantage of their financial advisors to help you achieve your goals.
Healthy finances lead to a healthier life, so try to start saving today!
Do you have any other recommendations to share? Please leave a comment!