Practicing sound personal finance is an important habit for anyone to develop. As your life changes, having a solid idea of your financial standing can help you make well-informed decisions and carefully plan for the future. And major life events are happening all the time. Consider these recent statistics:
In 2017, homebuyers purchased 5.51 million existing homes, according to the National Association of Realtors; 20.4 million students headed to college, NCES reported; and consumers purchased 17 million vehicles, according to The Truth About Cars.
In addition to these positive events, 2017 marked a year of unpredictable devastation: 16 separate climate and weather disaster events destroyed many thousands of homes, businesses and infrastructure. Each of the 16 storms cost more than $1 billion in loss, according to National Oceanic and Atmospheric Administration.
While each of these events marks major yet different life changes, they have one thing in common: They all cost money.
Whether you’re one of the millions of Americans who either bought a house, got married, had a baby, bought a car, graduated college, or experienced another major life event, it’s time to get your finances in order.
Why You Need to Practice Personal Finance
Some major life events can be foreseen well ahead of time. Your high school or college graduation hardly came as a surprise, and most couples spend at least a few months planning their wedding.
However, not all life changes are predictable – for the millions of people affected by wildfires or hurricanes in 2017, the storms and subsequent damage to their homes or other property might have come as a total shock.
Having your finances in order can help ease the stress that inevitably follows any life change. It can also help you prepare for the unexpected.
How to Get Your Finances In Order
To ensure your finances are in good order, you need to develop an understanding of your current financial situation. This includes:
- Knowing your income.
- Knowing your expenses.
- Having a budget, and actually following it.
- Having the right insurance products.
- Having an emergency savings account.
Step 1: Set a budget
Having a budget can help you ensure you’re spending your money wisely, and help you identify how much you can afford to save each month. To start your budget, first determine your monthly take-home income. Then, calculate your monthly expenses. These include housing, loan payments, utilities, food or other necessary purchases you need to make on a monthly basis. Subtract your monthly expenses from your monthly income, then allocate the rest to either leisure, recreational or social spending, and to savings.
NerdWallet suggested aiming for a breakdown where half of your income goes toward the essentials, 30 percent goes towards things you want and the remaining 20 percent is directed to savings or debt payments. Everyone’s situation will be different, so no two budgets will be the same. If you can get yours as close to this as possible, you should be in good shape.
Step 2: Start saving
Once you know how much you can save each month, it’s time to act. Begin by opening a savings account. You can automate your savings if your paycheck is direct deposited into your bank account; simply request that either a percentage or a fixed dollar amount is directed to your savings account. If this isn’t an option, it’s easy to make transfers between your Bank Midwest checking and savings accounts through the online banking portal or mobile app.
You have several options for your savings account, so choose wisely. You could go for a basic savings account to keep your money liquid should you need to access it in an emergency. Or, you could go with a Certificate of Deposit, which will give you a more favorable interest rate but won’t be accessible until a specific date in the future (unless you’re willing to pay a fee).
Step 3: Get insured
Saving is a smart way to provide financial flexibility for the future, but it’s not the only way you can (or should) prepare for large expenses in the years ahead. Even if you stick to your savings goals, it would still be financially difficult to recover from the loss of your house or a sudden serious illness or injury. For these major potential events, you should have insurance.
Here are a few types to consider:
- Health insurance will provide some preventative measures, like going in for an annual physical or getting your flu shot for free or a reduced rate. In situations like going to the emergency room or getting treatment for an infection, health insurance can help cover some of the expenses. Many employers offer health insurance to their employees, so if this option is available to you, it’s usually smart to take it. Otherwise, you can access health insurance through HealthCare.gov.
- Home insurance provides financial assistance should something bring damage or destruction to your home, like a fire, burglary or a storm.
- Auto insurance helps pay for damage to your car should you have an accident, or loss, should it be stolen.
- Life insurance can provide your family with the funds to cover your funeral as well as offer financial support after you die. This is especially important if you provide most or all of your family’s income.
If you would like a complimentary review of your insurance protection, reach out to an experienced Bank Midwest Insurance agent or request a quote online !
Helpful Resources to Help Manage Your Finances
Personal finances aren’t always easy to get in order. Sometimes, relying on helpful tools can make it a lot simpler. Here are a few smart resources to help you out:
Bank Midwest Mobile Banking App
Having your spending and savings information in one simple location can be immensely helpful in sticking to your budget and financial goals. Using the Bank Midwest Mobile Banking App, you can view your account balances, make transfers and pay bills.
Acorns makes investing incredibly simple. Create your account, choose your portfolio and link Acorns to your cards or bank accounts. When you make a purchase, it’ll round it up to the nearest dollar and invest the change. For example, if you buy a $4.87 cup of coffee, Acorns will invest 13 cents. In time, it all adds up.
Mint helps you plan your budget, allowing for some flexibility. Once you link your accounts, Mint will tell you some of your habits (good or bad) and make suggestions on what your budget should look like. It’ll also give you updates about how well you’re sticking to the budget and spending tendencies.