How To Prosper With Financial Self-Care

When we talk about prosperity, what we’re really talking about is happiness. We often associate material success and wealth with prosperity, but to be prosperous is really about thriving. It’s a holistic approach to financial matters where you consider what effect money has on you, your loved ones, and the community at large.

Money struggles can negatively impact our mental health and our relationships; they can also have dangerous long-lasting effects on the body. Stressing over money can lead to blood pressure issues, heart problems, and a host of other taxing health problems. Stress is the silent killer and money is often its accomplice. Practicing financial self-care isn’t just good for your pocketbook; it can help you live a more fulfilling and healthier life.

The Importance of Budgeting

One of the most important things you can do for your financial self-care is to budget and track your expenses. Budgeting offers you a clear picture of where your money is going and what you need to prioritize. If you’ve ever watched the numbers in your account dwindle and wonder where all that money went, budgeting is how you find the answer.

To budget, you’ll need to gather together your pay stubs and bills. Figure out how much your monthly take-home is after taxes. Then you’ll need to figure out what your total expenses are: your necessities and your luxuries. Spend a week paying attention to your spending habits. Do you buy lunch every day? Do you get coffee every morning? Do you use ride-shares? How much gas do you need after a week of commuting? Get receipts for everything so you can record it later.

How you go about budgeting is up to you. There are apps that can help you track your spending, or you can use a physical notebook or planner. The key is that whatever you use is something you’re comfortable with and that you can easily access it when you need to hunt down some important financial information.

The 50/30/20 Rule

A helpful rubric to use when you’re budgeting is to apply the 50/30/20 rule to your after-tax income. It breaks down as follows:

• Mandatory Expenses: 50 percent of your income should be allocated toward essentials and necessities. Groceries, rent/mortgage, medicine, and so on. 
• Creature Comforts: 30 percent of your income is your “fun money.” These are the funds you can use to treat yourself, seek out entertainment, and have a good time.
• Building Wealth: the remaining 20 percent of your income is for your savings and paying down debt.

This is a good rule of thumb to use but you can and should adjust as needed, depending on what your priorities are.

Better to Save a Little Than None at All

Many financial experts say you should have 3-6 months worth of income set aside in your savings for emergencies. The reality is that for many of us that is a goal that is hard, if not impossible to achieve (especially if you’re living paycheck to paycheck). Try to save what you can, ideally in a separate savings account so you won’t be tempted to dip into it when you access your regular funds. Studies have shown that even having a single month of savings can help reduce stress and give people peace of mind. 

One way to build up your savings is to automate it. Set up a transfer schedule with your bank so that small amounts of money go into your account each week. Even if it’s just $10-$20 deposits at a time, that can build up over time. If things are tight, look at your budget and see what you can sacrifice to keep that schedule on track. You could skip two coffees a week and save that money instead.

Some employers offer direct deposit options where you can split your check into different accounts, so you could also automate the deposit process by designating a set percentage of your paycheck to go straight to your savings account. While this can be a very convenient option if it’s available, be careful that you set an amount that you’re comfortable with because it can be time-consuming and complicated to change it afterward.

One last thing to consider: if you need to spend some of your savings, spend them. A very common mistake people make is relying on credit cards to get by when they have enough in savings to cover unexpected expenses. This may seem like a prudent choice at first, but in the long-term it could cost you thanks to interest payments on your cards and potential late fees and other penalties if you don’t pay those charges off in time. While you shouldn’t be dipping too often into your savings, it’s better to use it when you absolutely have to versus taking on more debt than you need to.

A Little Emotional Spending Goes a Long Way

There’s a reason why the phrase “retail therapy” exists: spending money can make you feel good. Experts call this “emotional spending.” When we’re feeling intense stress, some folks use spending as a way to alleviate that stress. This isn’t necessarily a bad thing in small doses. Treating yourself to something nice after a hard day can be just the thing you need. What you don’t want to do is indulge in emotional spending to excess. A bad mood could lead to a spending spree you can’t afford.

This is where budgeting and tracking your purchases come in handy. If you notice a trend where you spend large amounts of money on unplanned purchases, think back to your emotional state during those times. Were you under a lot of personal or professional pressure? If you notice that certain things in your life can trigger a bout of emotional spending (an argument with a friend or spouse, a bad day at work, negative feelings about your body or current living situation, etc), you can be prepared to exercise restraint and keep yourself from digging a financial hole.

Keep an Eye on Your Credit

It pays to be mindful of your credit scores. Checking your credit report regularly can help you be aware of any potential errors, missed payments, or other bad marks that end up on there. It can also give you a heads-up in case your identity gets stolen. If you’re worried that checking your credit score will impact your credit, don’t be: your credit score doesn’t get lowered when YOU check it. It’s when a lender or other credit issuer checks it that you can experience a brief dip.

A very important thing to keep in mind when checking your credit is not to be discouraged if it drops. Credit scores can ebb and flow for a variety of reasons. Even doing something good like paying off a loan can negatively impact your credit for a bit. It’s best not to obsess over it or try to make sense of it. Stay on top of your debts, practice good money management, and be patient. That number will tick upward over time.

Don’t Be Afraid to Talk About Money

It’s often said you shouldn’t talk about politics or religion if you want to have a civil conversation; a similar thing can be said about money. American culture tends to frown on having frank conversations about money, and that reluctance to discuss financial issues can often lead to huge knowledge gaps in our financial literacy. Find people you trust to talk to about your financial plans. Most of us don’t have a firm grasp on how to save for retirement, whether or not investing is right for us, or even if we’re being paid enough in the jobs we currently have. That’s why it’s important to speak to people who have that knowledge. 

If you’re going to seek out a professional like a financial planner or advisor, always do your due diligence to make sure that they’re credible. Much like seeing a doctor, it never hurts to get a second opinion. 

Article by Austin Brietta