With the unemployment rate having fallen to a relative low, and the stock market having hit new all-time highs, one might conclude that 2017 was a pretty good year for working Americans. But new data tells us that a growing number of employees are actually less content financially now than in years past.
According to a recent survey by consulting firm Willis Towers Watson, only 35% of workers indicated that they were satisfied with their present financial situation. That's a steep drop from the 48% of workers who felt the same way two years ago. In fact, up until recently, workers' attitudes about their finances had been improving steadily since 2009, when the nation was in the depths of the Great Recession.
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Not only are fewer workers satisfied with their financial circumstances now, but roughly one-third feel that their financial concerns are negatively impacting their quality of life. And nearly 60% of employees are actively worried about their financial futures.
If you're unhappy with your current financial situation, there may be steps you can take to improve matters before that discontent starts seriously impacting other elements of your life, like your relationships or performance at work. As we prepare to enter a new year, here are a few suggestions for things you can do to get a better handle on your finances.
1. Create a budget
Despite the fact that budgeting is one of the most effective money management tools in existence, the majority of Americans don't use it. If you're worried about your finances, but are currently without a budget, carve out an hour and create one. Once you compare the details of your monthly spending to the amount you bring home in your paychecks, you'll be better positioned to see where you're overdoing it, and which expenses you'll need to cut. Just as important, budgeting will give you a good sense of how much money you could potentially save -- and that might empower you to do better.
2. Establish a safety net
One common source of financial stress is the fear of getting hit with a big unexpected bill that's beyond one's means to pay. The best way to ease that concern, naturally, is to put yourself in a position to cover such unplanned expenses: Build up an emergency savings cushion. Regardless of your age or income level, you should aim to have a minimum of three months' worth of living expenses available in the bank at all times. And if your income is variable, or you're the sole earner in a household with multiple dependents, then you might consider making your goal six months' worth of living costs. Having that cash on hand will not only help you sleep better at night, but will keep you out of debt when expensive trouble does strike.
3. Consistently save 15% or more of each paycheck for retirement
It used to be the case that saving 10% of each paycheck would suffice to allow you to build a modest nest egg. But given the way senior living costs and lifespans are increasing, a more prudent approach is to aim to sock away 15% or more of each paycheck for the future. This is especially crucial if you're midway through your career and have yet to start funding a retirement account.
Thankfully, workers today have several tax-advantaged options for long-term investing. If your company offers a 401(k), it's wise to enroll and have contributions deducted automatically from your paychecks. This way, you'll never "see" the money you want to commit to saving, which helps you avoid the temptation to spend it elsewhere. Come 2018, the annual 401(k) contribution limit will increase to $18,500 for workers under 50. If you're 50 or older, you get a $6,000 catch-up that raises the maximum to $24,500.
If you don't have the opportunity to save in a 401(k), you can still invest money for retirement in a tax-advantaged way with an IRA. Though the annual contribution limits are significantly lower -- $5,500 for workers under 50, and $6,500 for those 50 and over -- if you're able to max out those contributions consistently, you stand to retire with a fairly robust account. And watching your balance rise could be just the thing to alleviate concerns about your financial future.
If you're unhappy with your financial situation, then it's time to work on making positive changes rather than continue to drown in negativity. In many cases, improving your financial outlook boils down to getting a better grip on your finances and taking steps to boost your immediate and long-term savings. And the sooner you start, the happier you'll be.
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