A Different Kind of Checkup

When it comes to the various dimensions of wellness, there is one area that is often overlooked: financial wellness. However, your financial health can impact many other areas of your life, including your physical health. The stress from worrying about money can definitely take its toll on the body. Therefore, it’s important to do at least an annual checkup of your finances to see where things stand.

Financial wellness is understanding your financial situation and taking care of it in such a way that you are prepared for financial changes. It includes being comfortable with where your money comes from and where it is going, but it is about more than just cash flow. A solid financial plan includes strategies such as budgeting, saving for emergencies, reducing or eliminating debt, and planning for retirement (and possibly paying for college, if you have children).

What is your financial IQ?

If the term financial wellness seems foreign to you, it may help to start with a simple assessment to measure your financial well-being. The Consumer Financial Protection Bureau (CFPB) offers a short questionnaire on their website, which provides your score, the US average score for comparison, and suggestions for improving your financial situation if needed. There are also several free consumer tools available if you need help in specific areas such as buying a house, paying for college or planning for retirement.

Budgeting basics

One of the most important steps you can take to help manage your finances is to create a budget. A budget is a financial plan that helps you balance income (money you earn) and expenses (money you spend) from month to month.  Creating a budget – and sticking to it – can help you save money and reach your short- and long-term financial goals. You can use something as simple as an Excel spreadsheet or a financial app such as Mint.

Budgeting does take time, effort and discipline, but it can be a very valuable financial tool. If you find you are not able to stick to your budget, it may mean you are spending beyond your means or that your budget is not flexible enough. Take the time to review and readjust your budget monthly until you find a plan that works for you.

Emergency savings fund

Maintaining an emergency savings fund is one of the pillars of financial wellness. This is the money you set aside for those unexpected events such as major car repairs, damage to your home, or worse, losing your job. How much money to keep in your emergency fund really depends on your circumstances. At the very minimum, you should aim for at least one month’s salary (i.e., your after-tax, take-home pay). A safer rule of thumb is the 3-6-9-month guideline:

  • 3 months’ salary may be enough if you are single, renting, have a steady paycheck and a “safety net” to fall back on (i.e., family or close friends who would gladly help you out if you were really in dire straits.)

 

  • 6 months’ salary is the most common recommendation particularly if you are married (with or without kids), own your home and have two steady paychecks coming in. Even so, you will likely want to base that amount on the take-home pay of the highest earner in your household.

 

  • 9 months’ salary may be warranted if you (and/or your spouse) are self-employed or full-time freelancers and your income is less predictable. Having an emergency fund padded with nine months of the highest earner’s net income may help you sleep a little better at night and not worry as much about weathering a financial storm.

One of the easiest ways to help you save is to set up an automatic deposit from your paycheck to your savings account. Many employers offer the option to split your paycheck between a checking and savings account, so a part of your pay gets automatically saved each pay period. Putting the money aside before you can spend it will help build up that rainy-day fund.

Dealing with debt

One of the first things to understand about debt is the difference between “good” debt and “bad” debt. There are certain types of debt that may provide opportunities to improve your financial future.

Good debt includes things like home mortgages and student loans, which typically are low cost and have potential tax advantages. With mortgages, you’re borrowing money to own a potentially appreciating asset, and the mortgage interest may be tax-deductible. With student loans, interest rates tend to be on the low side, and the interest is often tax-deductible. Plus, furthering your education can lead to enhanced career opportunities, which will hopefully increase your earning potential in the long run.

On the other hand, you want to avoid “bad” debt, which is generally high cost and not tax-deductible. The most common source of this debt is credit cards. The high interest rates associated with this debt will cost you over time. Credit cards are a necessity for most of us and can be helpful if you can pay them off every month and not accrue interest. It all goes back to budgeting and spending within your means.

If you are already in a situation where you are struggling to deal with paying down your debt, the worst thing you can do is ignore it. Consider working with a credit counseling organization that can advise you on managing your money and debts. They usually offer free educational materials and workshops. The National Foundation for Credit Counseling (NFCC) is one source for finding a reputable organization.

Planning for retirement

If you are planning on living off your Social Security benefits when you retire, you may want to reassess that decision. Although Social Security should be around for some time, for most of us, the amount we’ll receive won’t be sufficient to cover expenses, even with some “downsizing” of our lifestyle. Thus, it’s important to have some additional investments to ensure a happy retirement. Experts suggest the following guidelines based on the assumption that you’ll retire at 65, need about 75% of your pre-retirement income and that Social Security benefits will cover about a third of your expenses:

 

At Age Savings should be
40 7x your income
45 8x your income
50 9x your income
55 10x your income
60 11x your income
65 12x your income

 There are several options when it comes to saving for retirement. You may have access to a 401(k) or 403(b) plan through your employer, and if you’re lucky, your employer may contribute to it as well. However, if you are self-employed or your employer does not offer a retirement plan, you can open an account and make contributions on your own. The most important thing about saving for retirement is to start early.  Even if you can only contribute a small amount each month, your contributions will earn interest over time and you’ll have peace of mind watching your nest egg grow.

For those of you who are parents, a quick note about saving for college: if money is tight and there is a choice between funding your retirement account or your child’s college fund (such as a 529 plan), it is always best to fund your retirement first. You can use retirement funds to pay for college, but you can’t use a college fund to pay for retirement. There are also other options to help pay for college, like student loans, but no one is going to loan you money to retire.

Using a financial planner

Whether you are just starting out on your own or counting down the last few years until you can retire, it may be worth your while to secure the services of a financial planner. The Wall Street Journal has some helpful tips for choosing a financial planner. Experts recommend choosing a Certified Financial Planner (CFP), as these individuals have passed a rigorous test administered by the Certified Financial Planner Board of Standards and they must complete relevant continuing education to maintain their designation. A financial planner should offer to meet at least annually to review your financial holdings and ensure that you are on track to meet your financial goals.

As you can see, there are several reasons why it’s important to monitor your financial well-being. A little time and effort on the front end will ensure peace of mind during your golden years.  I can guarantee that your future self will thank you for it.

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Sun Safety

It’s May and we all know what that means: neighborhood pools will be opening soon, and many people will be heading outdoors or to the beach for Memorial Day weekend. That means it’s time for a quick refresher on how to stay safe in the summer sun.

Learning from past mistakes

I recently participated in a Mindful Triathlon (it was awesome – look for one in your area here). It was an outdoor event at a local park from early morning to mid-afternoon. Before I left the house, I applied sunscreen to my face, but since it was still a little chilly, I dressed in layers with most of my body covered and protected from the sun. I knew that I might shed layers as the day warmed up though, so I threw the bottle of sunscreen in my backpack. Around mid-morning when we moved into the yoga portion of the event, I removed my outer layer, but I failed to apply any sunscreen on my chest, back and other exposed areas. I thought about it briefly, but I rationalized that it was still early, and the sun’s rays weren’t that intense.

Wrong. The reddish hint of a minor sunburn later that day reminded me just how powerful the sun is…and why it’s so important to protect our skin. I have had my fair share of sunburns. One of the worst was just after I graduated college and spent the day at a beach volleyball tournament under a blazing hot sun. I applied sunscreen that morning but failed to reapply throughout the day. The result was a nasty sunburn that to this day, I believe has increased my sensitivity to being in the sun. I have also had a few “atypical moles” removed, which had the potential to turn into skin cancer. I know several people who have died from melanoma, so I am recommitting myself to follow these basic recommendations to help protect myself and my family.

Keys to protection

According to the CDC, the sun’s ultraviolet (UV) rays can damage your skin in as little as 15 minutes. One of the best things you can do is avoid being in the sun altogether, but none of us want to hide inside all summer. Instead, follow these recommendations to limit your exposure and reduce your risk when you do spend time in the sun.

  • Seek shade, especially late morning through mid-afternoon. This includes 10 am to 4 pm, during peak spring and summer days. Umbrellas, trees, or other shelters can provide relief from the sun.

 

  • Wear a hat, sunglasses and other clothes to protect skin. Protective clothing can reduce your burn risk by 27%. Sunglasses are essential to protect your eyes from UV radiation. They are also important to wear around surfaces that reflect the sun’s rays, like snow, sand, water, and concrete.

 

  • Use broad spectrum sunscreen with an SPF of 15 or higher to protect any exposed skin. Apply a thick layer at least 15 minutes before going outside, and reapply every two hours and after swimming, sweating, and/or toweling off. For help in choosing safe and effective sunscreens, check out the Environmental Working Group’s Guide to Sunscreens. A quick note about high SPF labels: anything higher than SPF 50 can tempt you to stay in the sun too long. Even if you don’t burn, your skin may be damaged. It is best to stick to an SPF between 15 and 50.

 

  • Remember that sunburns and skin damage can occur even on cloudy or overcast days. Thus, the above recommendations are still relevant even if the sun is not completely visible in the sky.

 

Skin cancer screening

Finally, as hard as we may try to protect ourselves from skin damage, we are human and likely to forget the protective clothing and/or sunscreen now and then. Therefore, being evaluated by a dermatologist once a year and checking your skin regularly are two excellent steps you can take to catch melanoma and other types of skin cancer early. The sooner skin cancer is found, the better the chances are of curing it.

It’s important to be familiar with your skin and report any changes to your dermatologist right away. Get into the habit of checking your skin once a month. Look for new moles appearing that haven’t been there before. You can also use the simple ABC guidelines to monitor for changes that may be of concern:

A is for asymmetry: one half of a mole looks different from the other half.

B is for border: the borders of a mole are uneven, jagged or scalloped.

C is for color: the color of a mole is different from one area to another.

It’s also important to note a mole’s size. If you have a mole larger than about a quarter of an inch across (about the size of a pencil eraser), have it checked. If there is a change in the size, shape, color or height of a mole, or if you develop symptoms such as bleeding, itching or tenderness, that should be evaluated, as well.

Being proactive and following the recommendations to reduce your exposure to the sun will still allow you to enjoy the great outdoors this summer and throughout the year. Be safe, be smart and have fun!

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