Get on the Path to Financial Wellness With This Simple Checklist
The concept of self-care is becoming increasingly popular but it goes beyond learning yoga or taking a mental health day from work. At its core, self-care is a focus on the self and managing your well-being physically, emotionally, mentally, and, though you may not realize it, financially.
Financial well-being spans four key areas: security to pay your recurring bills, a plan for unexpected costs, freedom of choice with how you spend, and pursuing your long-term financial goals. Your success in achieving financial well-being can be influenced by a variety of factors, including your attitudes toward money, decision-making, and behavior.
By taking time out to manage financial tasks, you can start developing good money habits that can pay dividends over time. Crafting a weekly financial self-care checklist may help you stay focused and on track as you pursue financial wellness.
Day 1: Take Inventory of Your Finances
The first item on your financial checklist is one you can't skip if you're committed to promoting better financial health. Once you know where you're starting from financially, you can work on fine-tuning your plan for long-term wellness where your money is concerned.
Taking stock of your monetary situation begins with asking the right questions and reviewing the right things. Your budget is a great place to begin.
For example, here are some of the most important questions to ask as you take inventory of where your money is coming from and going:
- How much money are you bringing in each month?
- Is that income consistent month to month?
- How often do you get paid and how are you allocating money toward your bills?
- What are your recurring monthly bills?
- Are you overspending in any category?
- How much of your budget is going to debt repayment?
- Are you including saving as a line-item in your budget?
Getting familiar with what you earn versus what you spend is the foundation for any financial self-care plan. But it's also important to look at your bigger financial picture.
For example, if you have debt you should know who you owe money to, the amount you owe, what you're paying in interest, and what percentage of your income goes toward debt each month. This information can come in handy once you get to Day 3 of your financial checklist (more on that below).
If you have irregular income because you run a business or work as a freelancer, calculate your average income for the previous 12 months. Then use that amount as your baseline to compare against your monthly spending.
Day 2: Get Back on Budget
Budgets aren't necessarily set in stone. While your income may stay relatively consistent month to month, you may find yourself spending more or less at different points in time. Charting your spending on a budget spreadsheet can make it easier to spot the patterns in your spending.
Once you've created your budget spreadsheet, analyze it to determine what you may be wasting money on each month and where you can afford to cut back. For instance, some more obvious things to reduce or eliminate may include:
- Streaming or subscription services you don't use
- Recurring memberships you don't actually need (for example, the gym)
- Entertainment and recreation
- Anything that's not a need, such as electronics, clothing, dinners out, etc.
Beyond those expenses, you should also look for other opportunities to practice financial self-care by trimming your budget. For instance, you may be able to lower your car insurance costs by shopping around for a new provider or save on homeowner's insurance by bundling coverage.
Day 3: Pay Down Debt
Debt can be a roadblock on the path to financial wellness and collectively, Americans carried $14.3 trillion in debt as of the first quarter of 2020. If you have debts that you're paying via automatic payments, first review your bank account activity to ensure that you have the money to cover those bills. This can help with avoiding costly overdraft fees or late payment penalties if a credit card or loan payment is returned.
Next, consider how to approach your debt payment plans if you have extra money left over in your budget after essential and non-essential expenses are covered. If you're carrying high-interest debt, that money could be applied toward those balances to pay them off faster. The sooner you can clear high-interest debt, the more money you can save on interest charges. There are a few strategies you can try, like the debt snowball strategy or the debt avalanche method.
Keep in mind, however, that you may want to allocate extra funds to savings if you don't have anything set aside for emergencies. According to a 2018 study from the Federal Reserve, approximately 40% of households aren't able to cover a $400 emergency with savings. If you don't have any money set aside, building up your savings can keep you from having to add to your debt by using credit cards to cover unexpected expenses.
Consider consolidating your debt or even refinancing your student loans to secure a lower interest rate. You may also be able to transfer high-interest credit card balances to a card with an introductory 0% annual percentage rate (APR).
Day 4: Build an Emergency Fund
Emergency funds can help bail you out financially if you run up against an unplanned expense or a financial situation you weren't expecting.
For example, if you get laid off from work or get sick and can't work, an emergency fund can help cover bills until things get back to normal. You can also draw on emergency savings to pay for things like vet bills, car repairs, or another critical expense you didn't see coming.
The amount you should have saved is up to you, though financial experts often recommend having three to six months' worth of expenses saved. Another rule of thumb you might use is to save a set dollar amount for each member of your household. So if you're a family of four, you might aim to save $2,500 per person for a total of $10,000 in emergency savings.
An effective way to save for emergencies is to add it into your budget as a recurring expense. By treating savings like a bill that has to be paid you can ensure that your emergency stash grows consistently.
Emergency funds are meant to be liquid savings, meaning you can tap into them when you need them. For that reason, you may want to use a high-yield savings account or money market account to hold your money, in place of a certificate of deposit (CD) or investment account.
Day 5: Save for Retirement
While you may not track your retirement savings every week, it's still important to have this item on your financial self-care checklist. Knowing how much you're saving (or not saving) toward retirement can help you determine how likely you are to reach your goal.
Investing through a 401(k) or 403(b) is often the easiest place to start with retirement planning. Many employers make it easy to save by making enrollment automatic when you're hired. If you're not sure whether you're enrolled in a retirement plan at work, get in touch with your human resources department. They can tell if you're signed up, what you're investing in, and how much you're contributing each payday.
If you don't have a retirement plan at work, an individual retirement account (IRA) is another way to save for the future. IRAs offer a tax-advantaged way to save for the future and you can open one at virtually any online brokerage.
As you check in with your retirement savings plan weekly, monthly, or quarterly, pay attention to the things like:
- How much you're contributing each month and year
- What you're investing your money in
- How well your investments are performing
- What you're paying in fees to invest
That last part is important because fees can eat away at your returns over time. Investments like low-cost exchange-traded funds (ETFs) can help keep fees at bay.
Use an online retirement planning calculator to estimate how much you'll need to save monthly or yearly in order to set yourself up for your future.
Day 6: Check on Your Credit Score and Report
Checking your credit score yourself doesn't impact your credit report or score so it's fine to add this to your weekly financial wellness routine. As you're reviewing your credit report and scores, pay attention to what's helping your score and what may be hurting it.
For example, things like paying bills on time, keeping credit card balances low, keeping old accounts open, and only applying for new credit sparingly can have a positive impact on your credit. Paying late, running up large balances in relation to your credit limits, and opening multiple credit accounts in a short period of time can hurt your score.
Also, review your credit card statements each month to check your total spending and what you may pay in interest charges if you're carrying a balance. This is also a good opportunity to review your statements for suspicious transactions that could indicate fraud.
If you find a credit report error, you can dispute it with the credit bureau that's reporting the information. By law, information that's proven to be inaccurate must be corrected or removed from your credit report.
Day 7: Make Your Financial Goals a Reality
Setting financial goals is another important aspect of self-care when it comes to your money. A lot of what's included on your financial checklist affects your money situation right now but you should also keep the future in sight.
Ask yourself what your specific goals are financially. It may be something simple, like taking a solo vacation or buying a new car, or something bigger, like buying a home. As you brainstorm goals, create a roadmap for achieving them.
For example, say your goal is to pay off your $20,000 in student loans in the next two years. Your current monthly payment is $500 and you pay 7% APR.
In this case, your financial checklist may look something like this:
- Refinance private student loans to lower your interest rate to 5%
- Increase your monthly payment to $875
- Review your budget to find the extra $375 to apply to your loans
- Consider starting a side hustle to bring in the additional money you need if you can't find it in your budget
- Apply any financial windfalls, such as a tax refund or stimulus check, to your principal balance
You could use the same approach to save $20,000 instead if that's your goal. Only the steps might be something like:
- Open a high-yield savings account to earn the best annual percentage yield (APY)
- Review your budget to find $875 to save each month
- Start a side hustle or use cashback apps to increase the amount of money you can save
- Grow your savings faster by depositing tax refunds or other windfalls into your account
The key is making your goals specific, measurable, achievable, relevant, and time-bound. And besides that, make sure you're keeping track of your progress weekly, monthly, and annually to see where you may need to adjust your plans.
The Bottom Line
While the occasional spa day is a great way to unwind, practicing self-care on a financial level means something more. If you're interested in achieving financial wellness for the long-term, then making money check-ins a regular part of your routine can help. While it may take some getting used to, your future self will be thankful for the efforts you're making to craft good money habits now.
Federal Reserve Bank of New York. "Pre-COVID-19 Data Shows Total Household Debt Increased in Q1 2020, Though Growth in Non-Housing Debt Slows." Accessed June 30, 2020.
Federal Reserve. "Report on the Economic Well-Being of U.S. Households in 2018-May 2019." Accessed June 30, 2020.