You workout 5 times a week (and hit your Paceline streak religiously), eat healthily, get 8 hours of sleep a night, and are always hydrated – but what are you doing about your financial health? We’re more than happy to share workout and nutrition information but money and finances are often something kept private. The thing is, financial health is just as important as your mental and physical health. So important in fact, that we’ve decided to put together our own little “Financial Health 101” course. It costs nothing (who needs more student debt?), we don’t take attendance, and you get an A when you start to make smart financial decisions! Ready to enroll? Great, please take your seats.
What is financial health?
Unfortunately, doing a few sets of “debt curls” can’t pay off your credit card, and as far as we know “hot yoga savings accounts” don’t exist (yet?). For simplicity’s sake, you can think of financial health as how much you spend, how much you save, how much you’ve borrowed, and how you’re planning for the future. Different points of life will require different levels of focus in any one category but if you’re happy with all 4 of these buckets, chances are your financial health is pretty good. Let’s dig in a little more on each of these areas of focus.
How much you spend
This is about as straightforward as it sounds – how much money are you spending? When you calculate your rent or mortgage, car payment, food and groceries, utilities, and discretionary spending, what are you putting out each month? These days, spending money is entirely too easy. Between subscription services for seemingly everything and the simplicity of mobile phone payments, it can be shockingly easy to spend far more than you realize. Keeping tabs on what you’re putting out is just as important as knowing what you’re bringing in.
How much you save
Look, we get it, saving money is hard. Life is expensive and there’s a lot of cool stuff out there to buy (a lot of it is cheaper when you hit your streaks on Paceline, though 😎). You’ve no doubt heard you should have enough in savings to sustain you for 3 months in the event of an unforeseen emergency. It can seem impossible to imagine a number like that all of the sudden occupying your savings account but, and we know you’ve heard this before, even a little bit each day can go a long way at the end of the year.
How much you borrow
This is just another way to think of debt. Whether it’s student debt, a mortgage, credit card bills, or hospital bills, nearly everyone owes somebody some money. The good news is that not all debt is bad (some of it is even smart to have) but it’s typically good practice to carry as little debt as possible. In addition to having less stress with less debt, creditors reward you with a higher credit score when they see you’re able to consistently pay off debt sums.
How you plan
We know you’re a healthy and fit superstar but everyone wants to retire at some point. Planning for the future requires, well, planning! Typically this comes in the form of a 401K at your job or an IRA account you put money into consistently. There are various retirement plan options with the main advantage being what you put into them won’t be taxed and not getting taxed on savings = good.
So that’ll do it for the first lesson, class. We’ll dig into each of these subjects in more depth later in the semester so be sure not to miss any future lectures. While a lot of this can seem daunting it’s important to remember just talking about these things is a great first step towards a more stable financial future. We’ll see you next week and don’t forget to read the syllabus!