Ep 8 The One About Financial Wellness

Feeling stressed? Focus on your financial wellness. Here’s how.

Show Notes

Financial wellness is taking steps to improve your overall quality of life with regard to the way you handle money. It involves paying attention to the big three – budgeting, saving, and investing. In this episode of the My Money My Freedom podcast, you’ll learn:

  • What financial wellness is and why it’s so important
  • My top 7 tips for financial wellness
  • The “pay yourself first” strategy
  • The core investment strategy I teach at My Money My Freedom
  • The 4 types of insurance you need to protect yourself and your financial future
  • My personal trick to avoid buying things on credit
  • The #1 tool for budgeting and paying off debt

Planning your financial future is one of the most meaningful and important things you can do to take care of yourself, because your health – physical, mental, spiritual, and financial – affects every aspect of your wellbeing.

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This is the My Money My Freedom podcast, where we unpack and simplify all things money so that you’ll always have more than enough to live your best life for life. Now here’s your host. Financial coach Susan Lassiter-Lyons. 

It is no secret that most Americans are not financially well. They spend more than they should, don’t save enough, and make bad decisions with their money. IN this podcast, we’re focusing on helping you improve your financial wellness. And I’ve got some tips and tools that will help.

What Is Financial Wellness?

Financial wellness is the process of incorporating both financial and emotional well-being. It is taking steps to improve your overall quality of life with regards to the way you handle money.

Financial wellness involves paying attention to the “big three” – budgeting, saving, and investing. 

These are all very different aspects of financial wellness but you need all three to work together in order for it to work successfully. 

Budgeting can help limit spending just by having a plan. If you have a plan, then it’ll be easier to stick to and you’ll start to think twice before spending money on things you don’t need.

Saving helps decrease financial stress just by having enough money set aside in case something unexpected happens like job loss or illness.

Investing helps you grow your money bigger faster and stronger than you can with budgeting or saving alone. The old saying goes that you can’t save your way to wealth and it’s 100% true – you must invest to grow your money and maximize your savings.

Investing also allows you to make extra income by putting your money to work earning interest, dividends, and capital gains. And that income, if it’s in the stock market and not in a rental property or something that’s really just another job in disguise, is truly passive. Meaning you don’t have to lift a finger to get that income. Or take a midnight call from an angry tenant or clueless property manager.

I’m primarily an income investor and that’s what my Infinite Income retirement investing model is based on. Currently every dollar I have invested in the stock market earns me an average of $0.31 in income. 

And that’s way better than letting my money be lazy and sit around playing videos games eating Cheetos all day in a savings account that pays me a fraction of a penny for each dollar in there.

So, Why Is Financial Wellness Important?

It’s important because it leads to a happier, healthier lifestyle by ensuring that there are no unnecessary stresses put on you because of your finances. This leads to less stress and more time to focus on other aspects of life instead of wasted time and emotional energy figuring out how to deal with an unexpected financial emergency like a car or house repair.

We all know that stress is bad for both our physical and mental health, so by ensuring peace-of-mind with regards to finances we are able to live happier lives than those who don’t pay attention to their financial wellness.

One of the key components to financial wellness is living below your means. This means that you are able to afford all of the necessities in life while still having some left over for fun.

Keeping up with the Joneses is a trap that so many people fall into. 

It’s important to appreciate what you have, instead of focusing on what others have and then measuring your worth based on what they have that you don’t have.

Alright, so now that we know what financial wellness is and why it’s important, I have seven Financial Wellness tips for you.

1. Create and stick to a monthly budget

A monthly budget is just a plan for how you’ll use your money. It helps organize your spending, and even more importantly, helps avoid spending too much on stuff you don’t need.

Just create an excel spreadsheet or Google sheet to make a detailed list of all your expenses. This includes personal expenses such as food, clothing, entertainment and even business expenses if you have one. 

I have a combined monthly budget for personal and business expenses so I know exactly how much is going out each month in total.

It might sound complicated, but it’s super easy. Once you have created your spreadsheet just categorize each expense by type (like., groceries, mortgage, phone bill), then plug in how much money you’re planning to spend in that category and at the end of the month you can see how you did. 

You will see what percentage of the budget you’re using and can cut back if needed or find out which items aren’t important so they can be removed from the budget entirely.

I make sure to list all my subscriptions and if I haven’t used it in a month, I usually cancel it. Like we got Disney + to watch Hamilton and I’m not a big Disney person except for Stitch – I love Lilo & Stitch but I already own that movie so I don’t have to keep a subscription I’m not using.

That’s the manual way of setting up a budget, but you can also automate it.

Tracking spending automatically with a tool like Mint is a great way to stay on top of your budget without spending any additional time.

It automatically creates a budget for me and shows me where I am overspending or underspending in any budget category. 

To set this up all you have to do is link all of your accounts – bank accounts, credit card accounts, loan accounts, and investment accounts – to Mint and it will log and categorize each transaction for you.

You may have to spend a bit of time at the beginning re-categorizing some stuff. 

Like for a few months it was categorizing my business payroll expenses as childcare expenses and I got an email from Mint saying I was over budget on childcare for the month.

As someone who doesn’t have kids, that was a weird email to get so I knew something was mis-categorized right away. But then I realized that I’m the only employee on my business payroll and I do act like a 12 year old most of the time so maybe Mint is smarter than we realize.

2. Build an adequate emergency fund

An emergency fund is money that you have set aside to cover unexpected expenses. This includes everything from a car repair, or an expensive vet bill for your pet. In 2020 both of my dogs had to have emergency surgery at about $5k a pop so my emergency fund got a workout.

Last year bankrate.com reported that that 59% of Americans don’t have enough savings to cover a $1,000 emergency and that’s a huge financial stressor.

If you’re in that boat, start by saving the equivalent of one paycheck and then work up to three months worth of living expenses in total savings. And then leave it alone except in the case of a true emergency.

And just so we’re clear, upgrading to the latest iPhone is not an emergency.

3. Pay yourself first

Paying yourself first means that you pay some of your income into savings and investment accounts before you do anything else with it – including paying bills.

It’s usually a percentage of your income and the idea is that if your income goes up, so should your savings goal. 

A good rule of thumb is to transfer 10% into your savings account and the maximum monthly contribution to your Roth IRA which is $500 a month if you’re younger than 50 and $583 a month if you’re over 50.

As long as you continue on this cycle of paying yourself first, there will always be enough emergency money and you’ll be in the habit of regularly and automatically contributing to your retirement account.

Speaking of retirement…

4. Start saving for retirement now

Your financial future depends largely on your savings for retirement. Starting to save now is the best way to take control of your future

And make sure you plan for the kind of retirement you want. I knew about 25 years ago that I wanted to move to Palm Springs and buy a great mid-century modern home with a private pool and join a tennis club.

None of those things are cheap, so I planned for them and saved and invested accordingly.

Start by maxing out your Roth IRA and investing in dividend paying stocks that will grow and compound safely over time.

The income they produce will get reinvested until retirement and when you decide to stop working for money and live off the income from your investments, you just stop reinvesting the income and transfer it to your checking account instead.

This is the core investment strategy I teach here at My Money My Freedom.

By investing a relatively small percentage of your paycheck each month, you’re taking the first step to financial wellness and securing your future financially. 

Consider also setting up a 401k with your employer if you are eligible and the company offers a match. This is another way to invest for retirement and many employers now offer a Roth option so that you don’t have to defer taxes until retirement when they will most likely be higher.

If you’re not saving for retirement, it might be time to take a look at the lifestyle future you is on track for and make some changes if you don’t like what you see.

5. Get the insurance you need

A good way to really secure your financial wellness is by getting insurance like life, health, or disability coverage.

To figure out what kind of insurance you need, ask yourself questions such as: What would happen if I got hit by a car and couldn’t work? Who will take care of me (and my family) if I became disabled? How will my mortgage be paid off if I die?

Long-term care insurance is another thing to consider.

It isn’t cheap but neither are Nursing homes and assisted living facilities so plan accordingly. Not just to protect yourself but also to protect your family.

I know a ton of women who are now footing the bill for a parent in one of these facilities and that’s a huge financial burden to put on a loved one.

6. Use credit wisely and sparingly

Credit is great until it’s not. 

Can you afford to pay off your credit card every month? If so, then congratulations! You’re in the clear. 

If not, there are some things that can be done to help you get back on track.

The first step is tracking your spending habits and paying attention to where your money is going each day: what items do I buy frequently or daily? What am I buying these everyday purchases with? Is it a debit card or my credit card? Which ones can I eliminate? 

Try to only use credit in an emergency situation and stop using it as a convenience. This will help prevent it from escalating out of control. 

I never carry cash and had my debit card hacked once at a self pay parking lot so I rarely use it.

One thing that’s really helped me over the years is to put everything on my American Express cards.

I have a personal Amex and a business Amex and I pay them off in full every month.

Plus, I have them linked to my Amazon account and use the points for fun stuff like books and dog treats.

Also, going back to Mint you can create a goal to get debt free and Mint will tell you exactly how much you should pay each month to each card that you want to pay off. It makes it super easy because you have a plan and can see the progress.

7. Consult a competent financial coach

A financial coach like me will work one on one with you to create a savings and investment plan and give objective feedback and guidance. 

We can also help by providing some much needed emotional support throughout the process. 

This is especially important for people who find themselves behind on saving for retirement, have a high debt, or those who are not prepared financially for the unexpected.

I always joke that I’m a financial coach but that ’s only about 25% of what I actually do. The other 75% is more like Financial Therapy.

Planning your financial future is one of the most meaningful and important things you can do to take care of yourself, because your health – physical, mental, spiritual, and financial – affects every aspect of your wellbeing.

See you next time.

Thanks for listening to My Money My Freedom. Visit our website at mymoneymyfreedom.co and follow us on Instagram @mymoneymyfreedomhq  

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