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7 Simple steps to financial wellness

As if people weren’t already stressed about money, the pandemic only amplified things. 

According to a 2020 report from the American Psychological Association (ACA), 64% of Americans are now super stressed about money. And 52% say they have experienced negative financial impacts thanks to COVID-19. 

The good news is that you can cut back on stress by taking steps to boost your financial wellness.

Financial wellness is all about your relationship with money. It involves what you know about finances, how you decide to spend and save money, how you prepare for the future, as well as your attitudes about money.

Here are seven steps to improve your financial wellness ASAP:

1. I.D. your money goals

Want to pay off student loan debt? Start a savings or retirement account? Buy health insurance? Whatever you want to achieve, incorporate it into your financial wellness plan.

2. Figure out your cash flow

Do you know where your money comes from and goes to?

Use the Consumer Financial Protection Bureau’s (CFPB) income tracker to get a complete picture of how much money you have to work with each month. Keep in mind: If you’re self-employed, have more than one job, or receive child support or government assistance, you may have multiple sources of income. 

Next, figure out how much money you spend every month on average. The CFPB offers a spending tracker to help you sort out your spending habits. Make sure you account for all your expenses, like housing, utilities, food, childcare, and insurance.

3. Create a budget 

Once you get a clear overview of your money, write up a monthly budget that aligns with your cash flow and financial goals. Christina Klenotic, senior vice president of lending company Laurel Road, suggests the 50/30/20 budget rule in a Healthline article:

  • 50% for fixed costs like rent, utilities, and car payments.
  • 30% for flexible expenses like groceries, clothes, and gas.
  • 20% for future-oriented goals like saving for retirement, building an emergency fund (more on this shortly), and paying off debts.

Your bank may offer a budget tool. You can also check out online tools like nerdwallet.com. It follows the 50/30/20 rule.

4. Keep track of your bill due dates

Missing your bill due dates can hurt your credit scores and overall financial health. 

To stay on top of your payments, plug all your due dates into your calendar and set reminders. 

If money is incredibly tight certain weeks, contact your creditors and utility companies to request due dates that better fit your cash flow. Not every company will let you change a date, but it may be worth checking.

5. Monitor your credit report

Every person in the country can get one free copy of their credit report each year. You can visit annualcreditreport.com to request reports from the three nationwide consumer credit reporting companies. 

You can check to make certain information like your address is up to date. You can also look for any signs of fraud or open accounts that may need to be closed. 

6. Start an emergency savings account 

You never know when a surprise medical bill or costly car repair will pop up. Create a savings account to stay ahead of emergency expenses that might otherwise plunge you into debt. 

Consider dedicating an entire savings account to emergency expenses. Start by setting aside as much money as you can afford. Get in the habit of adding money to this account whenever you’re able.

If you can, set up automatic recurring transfers. Even adding $25 a month can make a significant impact over time. 

7. Understand your insurance options 

Insurance can protect you from unexpected costs. It can also be part of financial planning. While not typically described as an investment, the right plan may protect your bank account in case of accident, injury or illness.

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