Personal finance is a subject that can be daunting if you aren’t familiar with all the basics. Sound financial management is important for both your current and future financial well-being. It also has deep-reaching effects on your mental state — causing stress and anxiety, worry and uncertainty in the wake of an unstable financial position.
The reverse is also true — when your finances are in order and you’re making smart money moves, your mental state is commensurately improved. There comes a day in many adult lives when they stop and think, “Oh! This is what it feels like to not be stressed about money. What a relief!” Or at least that’s true of anyone who put the work in and made sound financial decisions that led them to that day.
No matter what your financial status is, and no matter how healthy your bank account looks, it could be stated simply that you are responsible for your current condition — just from the point of view that a series of decisions (good or bad) added up to the state of affairs you find yourself in.
Being financially sound means that you are constantly making decisions that lead to an increased net worth. Logically that means that you are basing these decisions on your current financial status and are finding ways to improve it.
At a high level, that also means that you’re doing all the things that contribute to a state of financial well-being. For example, you’re saving regularly, not spending more than you make, putting money away in an emergency fund, budgeting, making smart investments for the long term, saving for retirement, paying off debt, finding ways to increase your income, and so on.
Unfortunately, that doesn’t apply to everyone. In fact, while about 70 percent of Americans report that they have some money in savings, the average amount in those savings accounts is only around $3500, and the average amount in an emergency fund is only $2000. In addition to that, less than 5 percent of people have more than $100,000 in savings, and there are many people (roughly 22 percent) that have between $1000 and $5000 saved. To put it another way — less than half of Americans have at least three months’ worth of expenses in an emergency account, 25 percent indicate having no emergency savings at all, and 1 in 3 Americans have $0 saved for retirement.
To become financially sound, the first thing to do is recognize where you stand financially. You should know exactly how much money you have coming in every month, where it gets spent, what your debts are, what your assets are, etc.
“Once you know where you are, you can plan for where you want to be,” says Martin Walcoe, President of David Lerner Associates...”Create some goals, build a strategy, and start taking action to accomplish your goals. If you need help along the way, there are trained professionals who can assist on your journey.”
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
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David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC