6 steps to financial wellness

By Personal FinanceFOXBusiness

Financial resolutions for the new year

Consumer expert Vera Gibbons on the steps to getting your finances in order in 2018.

A visit to your doctor isn’t the only checkup you should be getting every year. January is Financial Wellness Month, the perfect time to review your financial health.

Continue Reading Below

“The first step is to open your eyes,” says Dave Hanley, chief executive officer of Tomorrow. “That may literally mean opening up your bank statement to see the damage that may have been done at the end of the year. It may be opening your eyes and looking at the interest rates on your credit cards or how much money you have saved.”

MORE FROM FOX BUSINESS ...

Hanley has six tips for creating good money habits in the new year:

Check your credit score

If you are going to do one thing to improve your finances in the new year, Hanley says it should be to check your credit score. The Consumer Federation of America found over the past four years, the percentage of consumers who recently obtained at least one credit score has risen significantly. If it's been a while since you last looked at your credit score, you might be pleasantly surprised at what you find. The credit scoring company FICO says the average credit score in the United States climbed to 704 in 2018, reaching an all-time high.  A score of 704 falls in the range of 670 to 739, which is considered “Good.”

“You can start making the changes now,” he says. “They are going to pay off by the end of the year or into 2020 so that your credit can be as strong as possible.”

Create a budget

Budgets can be hard to manage for couples and families.  The National Foundation of Credit Counseling reports only about 41 percent of adults say they have a budget and keep track of how much they spend on  food, housing and entertainment.  If you need help creating a budget and sticking to it, Hanley recommends seeking the help of a web service such as www.YouNeedABudget.com. 

“Sit down and create a budget that’s realistic and then find a way to manage it so you know how you are doing,” he says. “If you’ve ever backpacked, it’s easier to take out a lightweight (item) than a heavyweight (item). You can’t take out your stove, but you can take out a few smaller items at a time.”

Create a will

A 2017 survey from Caring.com found only four in 10 American adults have a will or living trust. Hanley says many people mistakenly believe that a will only dictates who will get what property when an elderly person dies. He stresses that everyone should have a will, especially families with children.

“If something happens, who’s going to watch my kids?” he says. “Who’s going to be their guardian? You might be waiting until you have more money in the bank or until you have all of your kids, but now’s the time to get a will. Otherwise, the state will pick who’s going to take your kids.”

Get life insurance

Hanley says life insurance can be a lot cheaper than many people think it is. The 2018 Insurance Barometer Study from Life Happens and LIMRA found that 44 percent of millennials overestimate the cost of life insurance by five times the actual amount.

“A quarter of a million dollars in term life insurance might cost you as little as $13 or $15 a month,” he says. “It’s also easier now. You don’t have to get blood tests or physicals often for your life policies.”

Track your net worth

How financially healthy are you? How much do you have in assets, savings and debts? If you add up your assets and subtract your liabilities, you can calculate your net worth.  Hanley says not only does tracking your net worth show you how well you are doing, it’s also a great way to motivate yourself.

“This is a part of your long-term goal,” Hanley says. “It’s also part of how you reward yourself. I bought a house six years ago and it’s actually worth more. I should feel good about that and not feel bad that I’m paying more property taxes. While I made $5,000 in my paycheck, I also earned another $3,000 through investments. All of that is reinforcing the good behaviors you want to have this year.”

Reduce one monthly expense

Hanley says reducing expenses one at a time is more manageable than trying to tackle everything at once. 

“It could be a gym membership that you don’t use,” he says. “It could be a habit of buying a cup of coffee twice a day that you could cut back to only once.”

CLICK HERE TO GET THE FOX BUSINESS APP

With some forecasters warning of a pending recession in 2019 or 2020,  Hanley says now’s the time to get your finances in order. He says consumers shouldn’t be afraid at what they might find.

“It may not be that bad,” he says. “If it is bad, the steps to get things right are things that you probably know. Have confidence in yourself and just start step by step. You’ve got 12 months. You can do 12 things, one a month.  By the end of the year, you will be in a significantly better place than you are now.”

Linda Bell joined FOX Business Network (FBN) in 2014 as an assignment editor. She is an award-winning writer of business and financial content.  You can follow her on Twitter @lindanbell