Start With Savings
More specifically, you should start with your emergency fund. Before you pay off that debt, make sure you have at least $1,000 saved in your emergency fund. Often, things happen that are impossible to predict. That doesn't mean they are impossible to prepare for. Your emergency fund will provide a buffer in these cases and keep you from needing to use a credit card or a take out a high interest loan.
After you've added to your emergency fund, start thinking about your long-term savings goals. The obvious go-to goal is retirement, but your savings goals don't always have to be boring and frugal. Feel free to save up for something fun like a vacation. Simply getting into the habit of saving will help you immensely in the future.
Not All Debt Is Equal
When it comes to paying off debt, where you start really does matter. There some major differences between a home mortgage, student loans, and that $5,000 of credit card debt. Generally, higher interest debt — such as high interest debt from credit cards — is considered bad debt. This should be focused on first when paying down debt. A home loan with a 3% interest rate is not as pressing of a concern.
Budgeting is the key to financial wellness. You need to spend reasonably in order to save and pay down debt. Start by making a list of all your expenses for the month: what you spend on food, shelter, clothing, gas, entertainment, etc. and then compare that to your income. The most commonly given advice is that you should budget 50% of your income towards necessities like rent and food, 30% towards personal spending, and save the remaining 20%. When you first start budgeting, don't stray too far from this rule. As you learn more about budgeting and personal finance you can start to refine your budget based on your particular situation.
Check Your Credit Score
Credit scores can be an unpleasant concept, especially when you know yours isn't all that great. It's important to be aware of your credit score, however, if you want to improve your financial wellness. You need to keep track of it over time to make sure that your financial habits aren't damaging your score. Many people think that simply paying the minimum monthly payment is enough to get a great score, but it isn't.
In addition to all of this, if you don't routinely check your credit report you may miss the signs of identity theft. For many people, the first time they are made aware of identity theft is when they see a line of credit they don't recognize on their report. When you check your credit report routinely you are much more likely to catch identity theft early, before it can completely ruins your finances.
Employee financial wellness is one of the pillars of a productive workplace. Please, contact us at Summerlin-Roberts today to learn more about our employee communication and support services and how you can help promote employee financial wellness.