One in four American workers are seriously distressed about their personal financial situation (Garman).
Research studies show that workers with financial strain have greater absenteeism and lower productivity at work.
Financial stress can also lead to physical symptoms or health problems including high blood pressure, weight gain, headaches and insomnia (O’Neill, et al, 2005).
Financial problems also can wreak havoc on family relationships.
Keeping your financial life in good order or “fit” can reap many benefits for you and your family. What can you do?
The core exercise for financial fitness is saving. It’s obviously necessary to spend money on life’s essentials – housing, food, transportation, education, insurance and medical care and yes- recreation (for mental and behavioral health). It’s not if you spend money on these essentials, but how you spend your money on them. Whether you live below, at, or above your means for these essential spending categories will significantly affect your savings and financial health.
Saving Money
Saving is key to financial health because it allows to you cover both foreseen and unforeseen costs and will help position you for a comfortable retirement.
Key steps to saving
1.) Make and keep a budget. Figure out what you spend in a month on the essentials and non-essentials.
2.) Look for hidden costs and eliminate them. Do you buy your lunch, coffee, water everyday? Bring these items from home and you’ll save hundreds of dollars each year. Are your telephone, cell phone, cable TV plans cost efficient? If not, downgrade your service a little for big savings.
3.) Consult with a financial planner. One or two sessions with a qualified financial planner can offer you very specific information and recommendations about your personal finances, savings and investment strategies. You can also learn about your eligibility for important tax deductions.
4.) Invest your savings to make your money grow. Stocks, mutual funds, real estate are common investment vehicles. Following a professional consultation, many investment strategies can be made on-line.
5.) Read financial publications. Monthly magazines, (SmartMoney, Money, Fortune), financial newsletters, or books (Suzy Orman; Courage to Be Rich, David Chilton; The Wealthy Barber, William D. Danko, Thomas J. Stanley; The Wealthy Millionaire)
6.) Establish a weekly financial fitness work-out session. Set aside time each week to address your finances. This could mean paying bills, arranging to have your bills on autopay from your checking account to avoid late fees, reading a financial publication, comparing rates on a big ticket item you plan to buy for your home, or going to your bank to sign up for a higher interest yielding account or certificate of deposit.
Managing Debt
Limit yourself to one primary credit card and one back-up card. Resist all other offers regardless of how tempting they may be. Pay off your monthly credit card bill in full every month or limit your spending so that you are able to do this.
Other strategies to help pull you out of debt include;
1.) Mortgage refinancing
2.) 401(K) Borrowing
3.) Debt Consolidation
See Debt Management at SmartMoney University (smartmoney.com) for details on these options.
College Costs
If you have children that are heading to college either in a few years or 18 years, there are steps that you can take to help cover the considerable costs:
I. Tax Free Savings
529 Plans – These tax-free plans are considered the best way to save for college.
There are two types of 529 Plans: Pre-paid tuition plans and college savings plans.
Coverdell Education Savings Accounts (CESAs) function like an education IRA and allow you to contribute up to $2,000 per year per child and your earnings grow tax-free. For more information about how to choose the best plan for your family see College Planning at smartmoney.com.
II. Financial Aid
Many colleges and universities offer financial aid packages. Do your homework to find out what’s available.
Resources:
College Board's Fund Finder (www.collegeboard.com)
www.NASFAA.org Home/News (National Association of Student Financial Aid Administrators)
Financial Resources:
IAFF Financial Corp.
If you are a participant in the IAFF-FC FrontLine or a Nationwide Retirement
Solutions Deferred Compensation 457 Plan, you are eligible to receive
a financial plan, please contact or local representative or call -877-NRS-FORU
(677-3678) Option 1, Option 2.
moneycentral.msn.com
Pay It Down: From Debt to Wealth on $10 a Day by Jean Chatzky 2005.
References
1. Garman, E.T. et al. (2005). Financial Distress Among American Workers
Final Report: 30 Million Workers in America—One in Four—Are
Seriously Financially Distressed and Dissatisfied Causing Negative Impacts on Individuals, Families, and Employers.
2. Kim, J. & Garman, E.T. (2003). Financial Stress and Absenteeism: An Empirically Derived Research Model. Financial Counseling and Planning, 14, 1, 1-13.
3. O’Neill, B., Xiao, J.J., Sorhaindo, B., & Garman, E.T. (2005). Financially Distressed Consumers: Their Financial Practices, Financial Well-being, and Health. Financial Counseling and Planning, 17, 1, 71-85.