“The ability to meet all financial needs, today and over time; feel secure in the financial future; absorb a financial shock; and have the financial freedom to make choices to enjoy life.” It sounds beautiful doesn’t it? This is how the Consumer Financial Protection Bureau defines Financial Wellness. For some this may sound like a fantasy, but in reality, there are steps you can actively take to make this dream come true. Here are some tips on how to implement 5 key elements to create a positive impact on your financial wellness!
Budget. Budget. Budget. Budget. Budget. Did I say budget? You need to start by taking inventory. Use our expense tracker to start figuring out what you already spend money on. Then, using your own or the ACC student money management office’s budget template, evaluate your expenses and income to prioritize your necessities.
Build an emergency fund. Work it into your budget as an expense and save $500, $1000 or 3 to 6 months worth of expenses for any financial emergencies. Working up to these amounts doesn’t have to be immediate, but adding a set amount regularly to a savings account that’s based on your budget can go a long way.
Ideally as a college student, you should try not to accumulate too much debt. If you have some, making sure that you make the minimum payments is essential. You can see how long it will take you to pay off debt using this PowerPay tool. If you need immediate financial help, you can apply for the CRRSA Act (Coronavirus Response and Relief Supplemental Appropriations Act) offered by ACC. Being financially well also means that you don’t have to rely on credit cards to pay off any daily expenditures, which ties back into making sure you have a sound budget.
It’s never too early to start saving for retirement. If your job offers a 401k, be sure to contribute (usually 6% of your salary) so that you get maximum employer contribution to it. It also has the advantage of decreasing your taxable income since it is taken out before taxes but since it is tax deferred, you will have to pay taxes when it is distributed. If you expect to move to a higher tax bracket later, you may also consider a Roth 401k. Unlike a traditional 401k, a Roth IRA is filled with post tax money. However, withdrawals are tax free after the age of 59 ½. You may even withdraw contributions without taxes and penalties so it may even be used as an emergency fund (although having a dedicated emergency fund is better).
Make sure you have a goal in mind. There’s a reason that you’re delaying instant gratification. Having a goal gives you a purpose for your money. Maybe it’s to secure your retirement, buy a home, or pay for school. Either way, be sure to regularly check your progress towards your goals to help you stay on track.
Everyone’s path to seeking financial wellness will look different. What’s important is to do what works best for you! If you feel like you don’t know where to start, we encourage you to reach out to a financial coach at Mosaic, ACC’s partner for free virtual financial planning. It’s free and they can help you kickstart your journey to finding your version of financial wellness.
Tags: Shannon Pinales, William Chau
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