Improving Financial Health

8-14 FinanceHealthAdvice is easy to find on the Internet; sometimes it’s so easy to find that it’s overwhelming and discouraging. Financial advice is especially abundant, making it hard to sift through when you want to find the best steps to take to improve your financial health. Fortunately, all you have to do is start with the following steps and you will be on the path toward better financial health today.

Personal finance refers to the way that you manage your money now, such as by budgeting, and how you plan for the future, such as through investing. How well you handle your personal finances is your financial health. To improve your financial health, you must take control of your current spending and make sure you have a realistic and profitable plan for the future.

Calculate Net Worth

Some people become overwhelmed by their finances and ignore them. Even if you don’t want to know exactly how much money you do or do not have, it’s important for your financial health that you always stay on top of some basic calculations.

First, take out your calculator and add up all of your assets (the things you own) and subtract your liabilities (the money you owe) from that total. This resulting figure is known as your net worth, a number that describes where you are financially at the current moment.

“Calculating your net worth one time can be helpful, but the real value comes from making this calculation on a regular basis (at least yearly),” according to Jean Folger from Forbes. “Tracking your net worth over time allows you to evaluate your progress, highlight your successes and identify areas requiring improvement.”

Create a Simple Budget

It’s impossible to analyze your current spending and accurately predict your future finances without a budget. Fortunately, budgeting doesn’t have to be complex or time consuming. With a free online tool, such as Mint.com, it’s easy to automatically track expenses and determine how much you spend in various categories per month or week. You can use this information to tighten up on areas where you’re overspending and to determine how much you need to cut back to meet financial goals, such as saving up for a vacation.

Watch out for Lifestyle Inflation

“Most people will spend more money if they have more money to spend,” according to Folger. “As people advance in their careers and earn higher salaries, there tends to be a corresponding increase in spending … a phenomenon known as lifestyle inflation.”

If you want to have a healthy financial future, it’s important to keep lifestyle inflation in check. If you let lifestyle inflation get out of control, it will be much more difficult to save for your financial goals and plan for retirement.

In order to manage lifestyle inflation, be sure to recognize which life upgrades are required and reasonable and which are just a matter of the proverbial keeping up with the Joneses. For example, if you are promoted, you may need to buy nicer clothes, but you certainly do not need a sports car to perform well in your new position.

“Especially if you suddenly got a big jump in your income, keep your former standard of living and funnel the rest into paying off debts or adding to your retirement nest egg,” states Martha C. White from Time. “Since you’re not lowering your existing budget or cutting expenses, you’ll be able to accomplish all this without feeling like you’ve had to cut back or make sacrifices.”

Set Aside an Emergency Fund

Even if you have a well thought out budget, sometimes expenses arise suddenly that can blow your budget out of the water. If you have a $500 monthly automotive budget and you suddenly need an extra $700 for a repair, you will need an emergency fund to tap into.

One-time emergency expenses are one reason for an emergency fund, but they are not all you need to plan for. Most experts recommend saving enough to cover a few months’ expenses, so that your family can stay afloat if you lose your job or need to take unpaid leave.

Creating a category in your budget for your emergency fund ensures that you will regularly add to it and not use all of your discretionary money before you remember your emergency fund.

“Keep in mind that building an emergency fund is an ongoing mission: Odds are, as soon as it is funded you will need it for something,” states Folger. “Instead of being dejected about this, be glad that you were financially prepared, and start the process of building the fund again.”

Includes copyrighted material of IMakeNews, Inc. and its suppliers. Edited from original content supplied by IMN.

Smart Money-Planning Tips for Students to Implement Now

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Are you and your student prepared for the fall semester?

Before your student heads off to school, give them a crash course in Money 101. Merchants Bank has a number of options to help ease your student into financial freedom including checking and savings accounts, Online and Mobile Banking and more.

First, make a plan. Discussing college costs with your child is a must. Help him or her understand all school-related expenses – tuition, books, housing, gas (if he or she will have a car on campus), food, and much more – and which costs you or your child is responsible for. If your child received financial aid, how will that affect paying for college? Explaining the basics and setting expectations up front will make future money discussions easier. Of course, don’t forget to explain what a budget is and set one.
…and stick to it. Maintaining a budget is a skill your child will need to learn. What tools can you use to help him or her stay on track? With Merchants’ eChecking or Free Checking, students have free access to Online and Mobile Banking to track account activity 24/7. In addition, using a feature such as Manage My Money through Online Banking, can help students understand how they spend their money, set alerts when accounts hit a certain balance and much more.
Talk about banking options. Giving your child an overview on the types of banking accounts, services and cards is a good place to start. Most students will need a checking account, so review basic account features and potential fees (overdraft, ATM and otherwise). A Merchants Bank Customer Service Representative at your local branch is a good resource for this conversation. If your student will be living away from home, discuss how they can review their accounts online or on their smartphone and where they can take out cash when they need it. Merchants Bank offers fee-free ATM service at all of our locations, as well as Kwik Trip and Kwik Star locations in Minnesota, Wisconsin and Iowa.
 
For more information about specific accounts and services, click on the appropriate link below or contact your local branch.