FCCB Blog

Ready to embark on a journey toward financial wellness?

Achieving and keeping your financial health is a lifetime pursuit. We’ve outlined the 12 foundational steps toward achieving financial wellness and making it last. In each step, we’ll tackle the topic to help you learn all you need to know about that particular aspect of financial health. At the end of the process, you’ll have mastered the tools for a lifetime of financial wellness.

Step 1: Track your spending

Tracking your spending is the first step toward greater financial awareness and, ultimately, toward financial health. However, mastering this skill is easier said than done. How can you track every dollar you spend when you make multiple purchases each day?

Here’s how to track your spending in 3 simple steps.

1. Choose your tools. You can use a spreadsheet to record all of your expenses, track them manually with pen and paper, or hold onto every receipt and then review your spending at the end of the month.

2. Review your checking account and credit card statements. You may receive these in the mail, or you can access them online by logging into your account and downloading the information.

3. Review and categorize your purchases. When completing this step, don’t forget to include any automated payments you may rarely think about, such as subscription fees and insurance premiums.

Step 2: Create a budget

For some, the word "budget" stirs up cold chills, and for others, it's their cozy comfort zone. Whichever the case for you, the budget is an important tool for financial health.

Create a budget in 6 easy steps

1. Track your spending and income.
2. Tally up your totals in each category.
3. List your needs, or anything that is essential for living and basic functions.
4. List your wants. This includes anything that is not essential for living. Here, too, note the monthly cost of each item on your list and add up the total when you’re done.
5. Assign dollar amounts to your expenses, making sure the total does not exceed your estimated total for monthly expenses.
6. Review and tweak as necessary.

Step 3: Pay down debt

Consumer debt can be one of the biggest challenges to realizing good financial wellness, but with intentional action and commitment, reaching that goal and being financially independent is within reach.

First, organize your debt by listing every credit card and loan you have that has an outstanding balance and jot down the amount owed to each. Next, list the interest rate of each card.

Second, choose your debt-crushing method.

There are two main approaches people utilize for getting rid of their debts:

• The snowball method focuses on paying off your smallest debt first by putting any extra funds toward monthly payments while paying only the minimum payments on other debts. Once the focused debt is paid in full, shift your focus to the next-smallest debt and repeat until all debts have been paid off.
• The avalanche method involves getting rid of the debt that has the highest interest rate first and moving on to the debt with the next-highest rate until all debts are paid off.

Next, maximize your payments toward the debt you’ll be focusing on first. Finally, negotiate with your creditors for a discounted interest rate.

Step 4: Talk money with your partner

Talking finances with your partner may not be your idea of a shared romantic moment, but communicating openly about how to manage your money is a crucial part of having an honest and trusting relationship. Plan the discussion in advance so you’ll each have time to prepare the details you’d like to talk about, so you’ll both be ready to focus on the conversation without distractions. Start with a vision of a shared financial goal, and talk openly about sharing expenses and savings. Before the discussion ends, set up a weekly or bi-weekly time to talk money.

Step 5: Practice mindful spending

Mindless spending can be the downfall of even the most carefully planned budget. Learn to spend mindfully, finding alternative ways to de-stress. Consider disabling the one-click feature for online shopping and choose not to have your device “remember” your payment information. Also, when you don’t plan on spending money, leave your cards and cash at home. Finally, put large purchases on hold for a while so you make fewer impulse purchases that only lead to buyer’s remorse.

Step 6: Pay it forward

Money management can sometimes feel inherently selfish, but there is so much more you can do with the money you’ve been blessed to have – as well as with your time, talents and possessions. You can donate funds to your favorite cause, commit to doing one random act of kindness each day, volunteer at a local soup kitchen or hospital and donate old clothing to Goodwill, or pass it onto a friend or neighbor.

Step 7: Pay yourself first

“Pay yourself first” is a catchphrase that means prioritizing your personal savings above other expenses. Set short- and long-term saving goals, such as an emergency fund and saving up for a down payment for a house. Set a timeline for each savings goal, and calculate how much you’ll need to save each month to reach your goals in time. Automate your savings by setting up a monthly transfer from your checking account to savings account and monitor and tweak your savings as necessary.

Step 8: Know when and how to indulge

Many people equate financial health with a life of deprivation, but living a life of true financial wellness means being happy with a lifestyle that is within your means. However, that does not mean you have to be left feeling like you are lacking. Here’s how to indulge responsibly.

First, live with a budget. Be sure to leave room in your budget for “just for fun” purchases. Review your savings, making sure you are setting aside a percentage of your monthly income. Next, choose your “treats” carefully, selecting purchases that bring you happiness and positive energy and that you don’t regret later. Finally, let go of the guilt, knowing you are indulging responsibly.

Step 9: Build and maintain an excellent credit score

Your credit score is a crucial part of your financial health. An excellent credit score can open the door to large loans with better interest rates, as well as employment opportunities and more. On the flip side, a poor credit score can be a strong impediment toward building wealth, funding large purchases and finding gainful employment.

Here’s how to build and maintain an excellent credit score.

• Have several active credit cards
• Work on paying down debt
• Pay your bills on time
• Bring down your credit utilization ratio

Step 10: Plan for retirement

It’s never too early – or too late – to start planning for your retirement. First, set a target number.

Experts recommend taking your current living expenses and multiplying that number by 400 to reach the amount you’ll need for sustaining yourself based on a 4% return. Next, choose your retirement accounts, such as a 401(k) or IRA. Finally, select a target date fund if available, which will spread the money in your 401(k) across many asset classes and automatically become more conservative as you near your anticipated retirement date. A FCCB Wealth Advisor can work with you to create a plan to put you on track, and with regular reviews keep you on track, for a successful retirement.

Step 11: Start Investing

The world of investing can be vast and confusing, especially to a first-timer. There are so many decisions to make, and each one carries with it the risk of loss, or the promise of growth for your money. No worries – it’s easier than you think!

First, define your tolerance for risk. How much losing can you take? Next, define your investment goals. How do you plan to use this money after you’ve made this choice, pick an investment account, such as bonds, exchange-traded funds (EFTs), mutual funds or stocks. Finally, learn to diversify your portfolio and reduce risk. Many investors are tempted to make decisions based on the stock market’s recent performance or geopolitical world events.  Our financial advisors add value for clients by helping them to stay on-track with their investment plans by reminding them to maintain a long-term investment perspective.  As long as clients periodically review their investments to determine whether they are still appropriate for achieving their goals, we believe a long-term perspective gives clients the best chance of achieving financial success. Contact your local financial advisor to determine whether our investment philosophy might be appropriate for you.

Step 12: Review and tweak

Congratulations! You’ve reached the 12th and final step of the 12 steps to financial wellness. To maintain your financial health, it’s a good idea to review your financial circumstances on a regular basis, and tweak any area that needs adjustment.

Following these 12 steps can help you live a life of true financial wellness.