Simple Investing: 7 Steps to Grow Your Wealth Safely

coins with a lightbulb on top, in nature

Ever thought about investing your money, but not sure where to start? You’re not alone.

About 39% of adults don’t have any stock investments, according to a recent Gallup poll.(1) The good news: It’s never too late to start.

Investing is one of the most effective ways to grow your wealth over time.(2) And it doesn’t have to be risky.

Investing can help you save for retirement, pay for your children’s education, take a dream vacation, and build long-term wealth.

With a few simple steps, you can get started on a path to financial growth and security.

Here’s what you need to know:

What is Investing?
Investing is putting your money into assets with the expectation that they will grow over time.

These assets can include:(3)

  • Stocks
  • Bonds
  • Real estate
  • Mutual funds

Think of investing like planting a seed. It takes time for a seedling to develop roots, grow, and get bigger and stronger. Making smart investments can help grow your money over time, too.

Investing vs. putting money in a savings account
Investing helps your money grow faster than it would in a regular savings account.

While savings accounts offer some interest (average interest rate for savings accounts is 0.45%)(4), investments can provide much higher returns over time.

Investing also helps you build a financial cushion for future needs like:

  • Retirement
  • Emergencies
  • College tuition
  • Large purchases

Here are seven simple steps to help you start investing.

Step 1: Build an emergency fund
Before diving into investing, it’s crucial to have an emergency fund.(5)

  • This fund should cover three to six months’ worth of living expenses.
  • It acts as a safety net for unexpected expenses like medical bills or car repairs, so you don’t have to dip into your investments prematurely.

“Having a reserve fund for financial shocks can help you avoid relying on other forms of credit or loans that can turn into debt,” according to the Consumer Financial Protection Bureau.

Step 2: Make use of employer-sponsored retirement plans

If your employer offers a 401(k) or similar retirement plan, make sure to take advantage of it, especially if your employer offers matching contributions.

  • 67% of private employers offer 401(k) retirement plans(6)
  • 92% of employers that offer 401(k) retirement plans match employee contributions(7)

Employer matches are essentially free money that can significantly boost your retirement savings. Contributing to these plans can also offer tax benefits, reducing your taxable income each year.

Step 3: Understand your goals and risk tolerance

Before you begin investing, it’s important to understand what you hope to achieve and how much risk you’re comfortable taking.

  • Are you saving for retirement, a child’s education, or perhaps a dream vacation?
  • Knowing your goals will help you determine the right investment strategy.

Generally, the closer you are to needing the money, the less risk you should take.

  • For example, if you’re planning to retire in 10 years, you might want a more conservative portfolio compared to someone who is 20 years away from retirement.

Step 4: Understand different investment options
There are various investment options, each with its own risk and return profile. Some of the most common investment options include:(8)

  1. Stocks: Buying a stock means owning a piece of a company. If the company performs well, the stock value increases, and you make money. However, if the company performs poorly, the stock value decreases, and you could lose money. Stocks can be volatile, but offer high growth potential.
  2. Bonds: Bonds are loans you give to companies or governments in exchange for periodic interest payments and the return of the bond’s face value when it matures. Bonds are generally safer than stocks but usually offer lower returns.
  3. Mutual Funds and ETFs: These are collections of stocks, bonds, or other securities. Buying shares in a mutual fund or exchange-traded fund (ETF) gives you exposure to a diversified portfolio, reducing risk compared to investing in individual stocks or bonds.
  4. Real Estate: This type of investment typically includes residential homes, commercial buildings, and land.(9) While economic trends can cause real estate values to fluctuate, real estate values tend to rise over time.

Step 5: Start small
You don’t need a large amount of money to start investing.

  • Employer-sponsored 401(k) retirement plans don’t have a minimum contribution requirement.
  • Many online brokerage platforms allow you to begin investing with small amounts, sometimes as little as $100.
    Start with what you’re comfortable with and gradually increase your investments as you gain confidence and knowledge.

Step 6: Diversify your portfolio
A diversified portfolio is like a well-balanced diet. It includes a variety of investments, which helps spread out risk.

  • This means not putting all your money into one type of asset, like stocks.
  • Instead, consider a mix of stocks, bonds, and perhaps some real estate or mutual funds.

Stocks can offer higher returns but come with higher risk, while bonds are generally safer but offer lower returns.

Tip: Mutual funds and index funds are great choices for beginners, because they pool money from many investors to buy a diversified mix of assets, which can reduce risk.(10)

A balanced mix of stocks, bonds, and mutual funds can help you weather market volatility and protect your investments.

Step 7: Adopt a long-term perspective
Investing is a marathon, not a sprint. The market will have ups and downs, but historically, it has trended upwards over the long term.

  • Avoid making impulsive decisions based on short-term market fluctuations.
  • Stay focused on your long-term goals and give your investments time to grow.

Secure your financial future with simple investing

Growing your wealth through investing doesn’t have to be complicated or stressful. Following these seven simple investment strategies can help you achieve your financial goals.

Still have questions? Talk to a financial advisor for help based on your unique goals and circumstances.

References

  1. Gallup. (2023). What percentage of Americans own stock? From: https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx
  2. Turner, T., et al. (2024). What is investing and how does it work? Annuity. From: https://www.annuity.org/personal-finance/investing/
  3. U.S. Securities & Exchange Commission. (2024). Introduction to investing. From: https://www.investor.gov/introduction-investing
  4. Federal Deposit Insurance Corp. (2024). National rates and rate caps. From: https://www.fdic.gov/resources/bankers/national-rates/index.html
  5. Consumer Financial Protection Bureau. (2024). An essential guide to building an emergency fund. From: https://www.consumerfinance.gov/an-essential-guide-to-building-an-emergency-fund
  6. U.S. Bureau of Labor Statistics. (2021). 67 percent of private industry workers had access to retirement plans in 2020. From: https://www.bls.gov/opub/ted/2021/67-percent-of-private-industry-workers-had-access-to-retirement-plans-in-2020.htm
  7. Miller, S. (2015). One in four workers miss out on full 401(k) match. Society for Human Resource Management. From: https://www.shrm.org/topics-tools/news/benefits-compensation/one-four-workers-miss-full-401k-match
  8. U.S. Securities & Exchange Commission. (2024). Learn about investment options. From: https://www.investor.gov/introduction-investing/investing-basics/save-and-invest/learn-about-investment-options
  9. Folger, J., et al. (2024). The truth about real estate prices. Investopedia. From: https://www.investopedia.com/articles/mortages-real-estate/11/the-truth-about-the-real-estate-market.asp
  10. Lockert, M., et al. (2023). How to invest in index funds: A guide for beginners. Business Insider. From: https://www.businessinsider.com/personal-finance/how-to-invest-in-index-funds

Credit Score Check-Up: Here’s What This Magic Number Means

Credit Score cartoon graphic

What’s your credit score? If you’re thinking about borrowing money to buy a house, purchase a car, get a loan or sign up for a credit card, your credit score could be the deciding factor.

It’s kind of like a magic number that predicts your ability to borrow money.

If you don’t know your credit score, you could be in for a surprise, especially if you have a less-than perfect history of debts and paying your bills on time.

  • About 42% of adults who apply for a credit card or loan are denied because of their credit score.(1)

Maintaining a good credit score is crucial for financial health. If you don’t know your credit score or you haven’t checked it recently, it’s time for a credit-score check-up.

In this article, you’ll learn…

  • What your credit score means
  • Current trends in credit scores
  • Tools & resources to monitor your credit score
  • 4 tips to improve your credit score

Understanding your credit score

A credit score is a three-digit number that reflects your creditworthiness, based on your credit history.

It ranges from 300 to 850, with higher scores indicating better credit health.(2)

The score is calculated using several factors, including:

  • Your payment history
  • The amount of debt you owe
  • The length of your credit history
  • The types of credit you have, and…
  • Any new credit inquiries

Good vs. bad credit score

Most lenders review your credit score to evaluate your financial situation before giving you a loan.

In some cases, credit scores are also part of the application process to rent a house or apartment and get insurance.

So what’s a good credit score vs. a bad credit score? Here’s a breakdown:

  • 800 to 850: Excellent. People in this range are seen as very low-risk borrowers. They usually find it easy to get loans.
  • 740 to 799: Very Good. People in this range have a strong credit history and often find it easy to get more credit.
  • 670 to 739: Good. Lenders see people with these scores as acceptable or low-risk borrowers.
  • 580 to 669: Fair. People in this range are considered “subprime” borrowers. Lenders see them as higher risk, and they might have trouble getting new credit.
  • 300 to 579: Poor. People in this range often struggle to get approved for new credit. If you are in this category, you’ll likely need to work on improving your credit score before you can get new credit.

Current trends in credit scores

Wondering how your credit score measures up?

  • Current data shows that the average FICO credit score in the United States is 717, one point lower than a year ago.(3)

“This suggests that the effects of high interest rates and persistent inflation may be starting to weigh on consumers,” says Can Arkali, FICO Senior Director of Scores and Predictive Analytics, “especially those already struggling to manage their finances.”

Consumer behavior: 3 factors that impact overall credit scores

While your own credit score is the one that matters most to you, consumer behavior can impact credit scores, interest rates, risk level lenders are willing to take, and more.

3 factors that impact overall credit scores include:

  1. Payment history and default rates for mortgages, loans and credit cards
  2. Fluctuations in consumer debt balances
  3. Changes in applications for loans and credit cards

Check your credit score

Think you might apply for a loan or a credit card in the near future. Check your credit score.

Only 33% of adults check their credit score at least once a year.(4)

And that’s kind of a problem. Why? Identify theft and data breaches are on the rise.

Last year, identify theft reached an all-time high, impacting more than 353 million people with a potential loss of $12.5 billion.(5)

Fortunately, checking your credit score is easier than ever.

You can get a free annual credit report from one of the three major credit bureaus:

  • Equifax
  • Experian
  • TransUnion

You can also check your credit score with apps, online tools and resources, like:

  • AnnualCreditReport.com
  • CreditKarma
  • Mint
  • NerdWallet

Additionally, many financial institutions offer free credit score monitoring as part of their services.

These tools can be incredibly useful for staying on top of your credit health and identifying potential issues before they become major problems.

4 tips to improve your credit score
If you want to improve your credit score or maintain a healthy credit score (670 or higher), follow these four steps…6

  1. Pay your bills on time. Your payment history is the most significant factor affecting your credit score. Ensure you pay all bills by their due dates.
  2. Reduce your debt. Keep your credit card balances low and aim to pay off high-interest debt first.
  3. Avoid opening too many accounts: Each credit inquiry can slightly lower your score. Be strategic about applying for new credit.
  4. Review your credit report regularly: Check for errors or fraudulent activity that could negatively impact your score.

Ready for a credit score check-up?
Your credit score is a critical component of your financial health. By understanding what it means, you can make sure this “magic number” works in your favor.

Sources

  1. Davis, M., et al. (2022). 42% of Americans Were Denied a Financial Product—Like a Credit Card or Personal Loan—in the Past Year Because of Their Credit Score. Lending Tree. From: https://www.lendingtree.com/personal/credit-scores-financial-products-survey/
  2. Equifax. (2024). What Are the Different Ranges of Credit Scores? From: https://www.equifax.com/personal/education/credit/score/articles/-/learn/credit-score-ranges
  3. Arkali, C. (2024). Average U.S. FICO Score at 717 as More Consumers Face Financial Headwinds. FICO. From: https://www.fico.com/blogs/average-us-fico-score717-more-consumers-face-financial-headwinds
  4. DeMarco, J., et al. (2020). Just 33% of Americans Checked Their Credit Reports in the Past Year, Down From Last Two Years. Lending Tree. From: https://www.lendingtree.com/credit-cards/study/americans-check-credit-reports/
  5. Insurance Information Institute. (2024). Facts + Statistics: Identify theft and cybercrime. From: https://www.iii.org/fact-statistic/facts-statistics-identity-theft-andcybercrime
  6. Federal Reserve Board. (2024). 5 Tips for Improving Your Credit Score. From: https://www.federalreserve.gov/pubs/creditscore/creditscoretips_2.pdf

Budget Basics: 10 Tips to Manage Your Money

coins with a lightbulb on top, in nature

Where’s your money going every month?

In a world where one-click purchases and instant gratification rule, managing your
money might not always be on your priority list.
An estimated 74% of adults have a monthly budget, according to a recent survey. (1)Yet, 84% report overspending.

Been there, done that?
You already know this: You can’t keep overspending forever. If you want to manage
your money better, creating a budget you’ll actually follow can help you now and years
from now.
Whether you’re just starting out or looking to improve your financial habits, these ten tips
can help you take control of your budget and make your money work for you.

  1. Track your income & expenses: The first step in managing your money is knowing where it goes.
    • Track all your income sources and categorize your expenses.
    • Keep it simple. You can record what you spend in a notebook.
    • Or you can use apps or spreadsheets to keep track of how you spend your money.

    This is the best place to start. Why? Knowing how much you’re currently earning and
    spending is important data you need to create a budget.

    • Identify overspending. One recent study found that tracking your expenses is
      an effective way to identify overspending habits, and make adjustments to stay
      within a budget.(2)
    • Manual vs. automated expense tracking. Researchers also found that
      manually tracking your spending habits (in a notebook or spreadsheet) is more
      effective than automated tracking.

    “Automated tracking, with automatic collection of spending data through bank accounts
    or financial tools, is convenient but linked to lower attention and less financial
    self-awareness,” says lead researcher Dr. Yiling Zhang.
    “In contrast, active tracking through manual expense recording requires more
    engagement and is associated with higher financial self-awareness.”

  2. Create a budget: Once you have a clear picture of your financial situation, create a budget.
    • Allocate specific amounts for necessities like rent, groceries, utilities, and
      transportation.
    • Set aside funds for savings and discretionary spending.
    • Make sure your total expenses do not exceed your income. If it does, it’s time to
      look at ways to save money or increase your income.

    Want help creating a budget?
    Check out these free resources from the Federal Trade Commission:

    • Making a Budget
    • Budget Worksheet
  3. Prioritize saving: Pay yourself first. Treat savings as a non-negotiable expense.“Some people get the wrong idea when they hear the term, ‘Pay yourself first,’ says
    best-selling author, investor and entrepreneur Robert Kiyosaki.3
    “They actually hear, ‘Treat yourself first.’ They think it means splurging on things
    frivolously. Instead, the purpose is to make a conscious and purposeful contribution to
    [save and invest].”

    • Aim to save at least 20% of your income, if possible.
    • This can be divided between an emergency fund, retirement savings, and other
      long-term goals.
    • Automate your savings to ensure consistency.
      How’s your saving habit?
    • In a recent survey, 44% of adults said they would have to borrow money to cover
      an emergency expense of $1,000 or more.(4)
  4. Reduce high-interest debt: High-interest credit cards, loans and lines of credit can derail your financial plans to get
    a loan for a house, car or something else.Prioritize paying off these debts as quickly as possible.
    There’s at least two ways to do this:
    The snowball method.

    • Focus on paying off your smallest debts first.

    “Once that smallest debt is toast, roll what you were paying into the next smallest,
    creating a snowball effect,” says best-selling author and financial advisor Dave
    Ramsey.(5)
    “It’s not about math. It’s about momentum and gaining quick wins. Before you know it,
    you’re knocking out debts left and right, building confidence and momentum like a
    snowball rolling downhill
    The avalanche method

    • Focus on paying off debts with the highest-interest rates first
    • You’ll need to review your debts and interest rates to figure out where to start
    • Credit cards, personal loans, or payday loans typically have high interest rates.
    • Home loans and student loans typically have the lowest interest rates.

    The cost of high-interest debt
    If you have high-interest credit cards or loans, how much are you paying in interest?

    • The average interest rate for credit cards is 22.8%.(6)
    • To put that in perspective, let’s say you only make the minimum payment on a
      $10,000 credit card balance. It would take you about 29 years to pay off the debt,
      and cost you about $19,000.
    • On average, credit card companies charge consumers an estimated $105 billion
      a year in interest.
  5. Cut unnecessary expenses: Review your spending to identify non-essential expenses that you can cut back on.This might include things like:
    • Cancel or downgrade subscriptions for things like streaming services, cell
      phones, software, gym memberships, or consumer goods. One recent survey
      found that consumers underestimate monthly subscription costs by $133.(7)
    • Dine out less often, and cook at home instead.
    • Limit impulse purchases. If you’ve done the work to track expenses and budget
      your money, you know how much you have (or don’t have) for impulse
      purchases.
    • Change your entertainment habits: Instead of paying for movies, concerts,
      theme parks, and shows, find less expensive alternatives you can enjoy.
    • Lower your energy bill by turning off lights, unplugging electronics, and using
      energy-efficient lights and appliances.
  6. Plan for major expenses:
    What are you going to do if your refrigerator fails, your car breaks down, or you’re hit
    with medical bills not covered by insurance?If you don’t have a financial plan to pay for major expenses, you could be in trouble.
    It’s not a matter of if you’re going to need money for a major expense, but when. And
    you can do something about it.

    • Anticipate and plan for large, irregular expenses like car repairs, medical bills, or
      vacations.
    • Set aside money each month in a designated fund for these costs.
      When something does happen, having money set aside will make the situation a lot less
      stressful.
  7. Use credit wisely: Credit cards and loans can be useful financial tools if used responsibly. Here are a few
    ways to keep your spending habits in check when it comes to credit:

    • Always pay your balance in full to avoid interest charges. Research shows that
      only 38% of adults pay off their credit card balance every month.(8) And that can
      get expensive (see #4 & the cost of high-interest debt).
    • Use credit cards for convenience and rewards.
    • Never spend more than you can afford to pay off each month.
  8. Build an emergency fund:
    An emergency fund is crucial for financial security.
    You can’t predict when something might happen that could impact your income, like:

    • Job loss
    • Injury or illness
    • Natural disaster or pandemic (An estimated one-third of adults lost jobs and
      income during the COVID-19 pandemic.(9)

    Having money set aside in an emergency fund will help you get through situations like
    this:

    • Aim to save three to six months worth of living expenses in a separate, easily
      accessible account.
    • If that sounds like a lot, start by saving for one month of living expenses.
    • This fund can cover unexpected expenses like job loss or medical emergencies,
      preventing you from going into debt.
  9. Review & adjust your budget regularly:Your financial situation and goals may change over time, so it’s important to review and
    adjust your budget regularly.

    • At least once a month, compare your actual spending to your budget and make
      any necessary adjustments.
    • This helps ensure you stay on track and continue to meet your financial goals.
  10. Get help from a professional:
    If you’re struggling to manage your finances, don’t ignore your money problems and
    hope they’ll get better on their own. Instead…

    • Get help from a financial advisor or debt management professional
    • Depending on your situation, it might make sense to talk with an attorney,
      accountant, or tax advisor, too.

    These experts can provide personalized guidance based on your specific situation and
    help you develop a long-term financial plan.
    Budget-friendly habits make a difference
    Here’s the big reason following a budget makes a difference…

    • Poor financial habits can strain relationships, increase stress, negatively impact
      overall health, and contribute to low satisfaction with life.(2)

    But it doesn’t have to be that way.
    By following these 10 tips, you can create a budget that works for you, reduce debt,
    build savings, and achieve greater financial stability.

References

      1. Marder, A. (2023). Most Americans Have a Monthly Budget, But Many Still
        Overspend. Nerd Wallet. From:
        https://www.nerdwallet.com/article/finance/data-2023-budgeting-report
      2. Zhang, Y. (2023). Financial Self-Regulation: How Does Expense-Tracking Inform
        Financial Behaviors? Consumer Interest Annual, 69:
        https://www.consumerinterests.org/assets/docs/CIA/CIA2023/ZhangYilingCIA2023.pdf
      3. Kiyosaki, R. (2023). Always Pay Yourself First. From:
        https://www.richdad.com/pay-yourself-first
      4. Gillespie, L. (2024). Bankrate’s 2024 annual emergency savings report. From:
        https://www.bankrate.com/banking/savings/emergency-savings-report
      5. Ramsey. D. (2024). Total Money Makeover: A Proven Plan for Financial Peace.
        Thomas Nelson Publishing. From:
        https://www.amazon.com/Total-Money-Makeover-Updated-Expanded-ebook/dp/B0CLKZKW54
      6. Martinez, et al. (2024). Credit card interest rate margins at all-time high. From:
        https://www.consumerfinance.gov/about-us/blog/credit-card-interest-rate-margins-at-all-time-high/
      7. C+R Research. (2022). Subscription Service Statistics and Costs. From:
        https://www.crresearch.com/blog/subscription-service-statistics-and-costs/
      8. Backman, M. (2023). Only 38% of Consumers Pay Off Their Credit Card Bills in Full
        Each Month. From:
        https://www.fool.com/the-ascent/credit-cards/articles/only-38-of-consumers-pay-off-theircredit-card-bills-in-full-each-month-do-these-things-to-join-their-ranks/
      9. Hrynowski, Z. (2020). COVID-19 Disrupts 30% of American’s Jobs or Finances.
        From: https://news.gallup.com/poll/309299/covid-disrupts-americans-jobs-finances.aspx

Money Matters: 10 Health Risks Linked to Financial Stress

money with stress related text boxes

How’s your relationship with money?

Whether you’re just scraping by, or you have plenty of money, most people experience financial stress in one way or another. Left unchecked, financial stress can take a toll on more than your bottom line. It can take a toll on your health, too.

In a recent survey by the American Psychological Association, 66% of adults said money is a significant source of stress in their lives. (1) The money survey also found that:

  • 55% Money is a common cause of contention in relationships
  • 57% Frequently worry about having enough money to pay for basic things like food and rent
  • 43% Worry about saving enough money for future expenses
  • 56% Adjusted priorities and made different choices because of a lack of money

So what does financial stress have to do with your health?

More than you might realize. It’s no secret chronic stress is a risk factor for health problems. But what about financial stress?

In a recent study, researchers looked at the impact of financial stress on health.2 They found that money-related stress can weaken the immune system and increase the risk for chronic disease.

“We found that financial stress was most detrimental to biological health,” says University College of London researcher Dr. Odessa Hamilton.

“This may be because this form of stress can invade many aspects of our lives, leading to family conflict, social exclusion, and even hunger or homelessness.”

10 Health Risks Linked to Financial Stress

If you’re living with a constant stream of financial stress, it can take a toll on your bank account and your health, especially if you try and ignore the problem.

In fact, research shows chronic financial stress may increase the risk for:(3,4, 5)

  1. Depression
  2. Anxiety
  3. Heart disease
  4. Auto-immune disorders
  5. Chronic pain
  6. Headaches
  7. Digestive problems
  8. High blood pressure
  9. Muscle tension
  10. Early death

Feeling the weight of financial stress?

If you’re experiencing financial stress, doing nothing won’t help you change your circumstances.

But you can reach out for help from professionals to learn more about how to pay off debt, increase your income, create a budget, or access resources from your employee assistance program or government programs.

References

  1. Bethune, S., (2022). Stress in America. American Psychological Association. From: https://www.apa.org/news/press/releases/stress/2022/concerned-future-inflation
  2. Hamilton, O., et al. (2024). Immune-neuroendocrine patterning and response to stress. A latent profile analysis in the English longitudinal study of ageing. Brain, Behavior, and Immunity, 115:600-608. From: https://www.sciencedirect.com/science/article/pii/S0889159123003458?via%3Dihub
  3. Ryu, S., et al. (2023). The relationship between finnacial worries and psychological distress among U.S. adults. Journal of Family and Economic Issues, 44(1): 16-33. From: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8806009/
  4. Evans, M., et al. (2020). Mental and physical health correlates of financial difficulties among African-American older adults in low-income areas of Los Angeles. Frontiers in Public Health, 8:21. From: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7028705/
  5. Hathcock, A., (2021). Mental well-being inherently connected to financial wellness. Purdue University. From: https://www.purdue.edu/newsroom/purduetoday/releases/2021/Q1/mental-well-being-inherently-connected-to-financial-wellness.html

10 Smart-Money Tips to Improve Your Financial Wellness

piggy bank with dollar sticking out of the top

Whether you’re rich or poor, or somewhere in between, money is the leading cause of stress for most adults. And that’s a problem that can affect your health and your life.
People who have money stress are 19% more likely to have a heart attack.(1) Money matters are also among the top 10 leading causes of divorce and separation among couples.(2)

  • Stressed out about your bank account balance?
  • Do you panic a little just thinking about a car repair, college costs, or retirement?

That’s pretty normal for most people. But instead of just worrying, make a choice to do something about it. Take some time to assess your finances. Learn to make smarter decisions about spending and saving. And you’ll improve your health and your life.

In this article, you’ll learn 10 smart-money tips to help you improve your financial wellness.

5 simple habits for financial wellness

Want to be a millionaire? Researcher Dr. Thomas Stanley interviewed ordinary people with a net worth of more than $1 million to find out how they did it.3

His goal was to identify their habits and attitudes about money to create a formula for building wealth. But it turned out to be pretty simple:

  • Spend less than you earn.
  • Don’t buy overpriced cars, property, products, and services.
  • Save for a rainy day.
  • Learn to make smart investments.
  • Practice financial wellness consistently

How’s your financial fitness?

Wondering how to give your financial wellness a check-up?

It’s a lot like stepping on the scale, taking measurements, and giving your food choices an honest review to improve your health.

Once you know where you’re at and what you’re doing well, you can take action to improve. Take a look at this data on financial wellness and consider your own money matters. Did you know…

  • 36% of adults have no savings(4)
  • 19% of adults have less than $1,000 saved(4)
  • 45% of adults have $1,000 or more in savings(4)
  • 25% of adults rely on credit cards to pay bills(4)
  • The average credit card balance in the U.S. is $6,501(5)
  • That if you skipped buying a morning coffee (average price $4.90) every day and saved the money, you’d have $13,885 in 10 years.
  • 78% of adults live from paycheck to paycheck(6)
  • The average monthly car payment is $726 for new vehicles and $533 for used vehicles(7)
  • People in deep debt are three times more likely to experience fatigue, illness and mental health problems like anxiety and depression(8)

10 smart-money tips to improve financial wellness

How’s your financial wellness? If you’re looking for smart, actionable ways to improve your bottom line, here are some things you can do:

1. Spend less than you earn

Are you living paycheck to paycheck? Take a closer look at where you’re spending your money. Find ways to save, like going out to eat less. For example, the average American spends about $3,000 a year on dining out. Could you use that money for something else?

Tip: Create a budget to help you spend less than you earn. It’s one of the best ways to help you reach your financial goals.

2. Pay off credit card debt

The average U.S. household has about $13,000 in credit card debt. If you paid the minimum every month and never charged anything else, it would take you more than 15 years to pay it off. Interest commonly ranges from 15 to 30 percent. Credit cards are usually the most expensive form of debt.

Tip: Pay off your balance every month, or at least plan to pay more than the minimum.

3. Pay yourself first

About 36 percent of U.S. adults don’t have any money in savings. And that’s a problem if you want to save for retirement or have money on hand in case of an emergency or unexpected expense.

Tip: Budget for saving a little money every month, just like you would to pay a bill.

4. Save a few months of living expenses

You can’t predict a job loss, illness, or injury that could put a stop to your income. But it happens to people all the time.

Tip: Set aside enough cash to cover six months of living expenses. Sound impossible? Start by saving enough to cover one month of living expenses.

5. Complete a will

This is a basic rule of financial wellness for all adults, especially if you have dependents. However, more than half of U.S. adults die without a will.

Tip: If you want to protect your family and financial assets, get help from an attorney to help you complete a will.

6. Ask an expert

Making big decisions about buying a home, investing, and saving for retirement can be tough to do on your own.

Tip: Get help from a financial planner to help you be informed. The decisions you make will affect your future.

7. Save for retirement

How much do you need to save for retirement? Census data shows that 46% of adults have no money saved for retirement. But need at least four times that to enjoy your senior years and cover medical costs.(9)

Tip: Start saving for retirement early. Take advantage of any tax-deductible contributions you can make through payroll deduction to grow your 401(k).

8. Plan for major expenses

Is buying a house, getting a new car, or sending a kid to college in your future? Set money aside to make those costs easier to handle.

Tip: Budget for insurance. Protecting your health, assets, and family is also an important part of financial wellness.

9. Keep on learning

Learn all you can about money matters. It will help you make better decisions about financial management, investing, spending, and saving.

Tip: You can also learn new skills that can help you increase your income.

10. Give your financial health a check-up

Review your credit report at least once a year. Take some time to evaluate your budget, debts, and investments. Review your goals. Adjust as needed to stay on track.

Making decisions about money isn’t always easy. But if you take the time to plan for financial wellness, you’ll be happier, healthier, and better off as you age.

Sources

  1. Swarup, S., et al. (2024). Cardiovascular consequences of financial stress: A systematic review and meta-analysis. Current Problems in Cardiology, 49(2): 102153. From: https://www.sciencedirect.com/science/article/abs/pii/S0146280623005704
  2. Litner, J. (2022). The top 12 reasons for divorce. PsychCentral. From: https://psychcentral.com/relationships/top-reasons-for-divorce
  3. Stanley, T., et al. (2010). The Millionaire Next Door: The Surprising Secrets of American’s Wealthy. Lanham, M.D.: Taylor Trade Publishing.
  4. Bieber, C. Americans do not have enough savings. Here’s what you can do about it. Nasdaq. From: https://www.nasdaq.com/articles/americans-do-not-have-enough-savings.-heres-what-you-can-do-about-it
  5. Horymski, C. (20022). Average credit card debt increases 10% to $6,501 in 2023. From: https://www.experian.com/blogs/ask-experian/state-of-credit-cards/
  6. Batdorf, E. (2024). Living paycheck to paycheck statistics 2024. Forbes. From: https://www.forbes.com/advisor/banking/living-paycheck-to-paycheck-statistics-2024/
  7. Palasciano, A., (2024). The average car payments for new and used cars in 2024. Nasdaq. From: https://www.nasdaq.com/articles/the-average-car-payments-for-new-and-used-cars-in-2024
  8. Gillespe, L., et al. (2023). Debt and mental health statistics. Bankrate. From: https://www.bankrate.com/personal-finance/mental-health-and-debt-statistics/
  9. USAFacts. (2023). Nearly half of American households have no retirement savings. From: https://usafacts.org/data-projects/retirement-savings

How’s your financial health?

Everybody experiences stress now and then. Work gets crazy. There’s a family crisis. Maybe it’s your health, or an unexpected event like an accident or natural disaster.

Everybody’s situation is a little different. But there’s one source of stress that everyone experiences whether you’re rich, poor or somewhere in between…money.

How’s your financial health? If it isn’t perfect, you’re not alone.
About 76 percent of adults in the U.S. say their number one source of stress is work and money.1

  • Maybe it’s an unexpected car repair or medical bill.
  • Or you’re not sure how to cover the mortgage or rent.
  • Maybe you’re trying to buy a house.
  • Or you’ve got kids to put through college and you’re trying to save for retirement.
  • Or you’re concerned about the stock market, your investments, and your future.

For most people, financial stress is always there…nickel-and-diming away your thoughts, your health, and your happiness. And if you don’t do anything about it, long-term stress can even increase your risk for a heart attack.2

But it doesn’t have to be that way. Getting a handle on your money can reduce stress, help you save for emergencies, and even improve your health.

The millionaire mindset

In the book, The Millionaire Next Door: The Surprising Secrets of American’s Wealthy, authors Thomas Stanley and William Danko interviewed hundreds of self-made millionaires to find out what they had in common about money.3 And their advice was surprisingly simple.

Here are 9 ways to improve your financial wellness:
1. Spend less than you earn
If you’re living paycheck to paycheck, you’ve probably heard the advice before. Maybe it’s an income problem, and you need to improve your skills to get a better job, or you live in an expensive area. But take a closer look at your spending habits. You may find ways to stretch your budget. For example, the average adult spends $2,000 to $4,000 per year on dining out.4

Tip: Use online tool such as Mint.com or other tools to create a budget and manage your spending. You can even track your spending in the FitLyfe platform, and set reminders to pay your bills.

2. Avoid credit card debt, pay off balances
If you use credit cards, pay off the balance as soon as possible to avoid high-interest fees (usually 18 to 30 percent). Wondering where you stand? In the U.S., the average adult has $4,192 in credit card debt.5 But if you only pay the minimum, without racking up any more debt, it will take years to pay that off.

3. Save some money every month
How much money are you saving every month? 5 percent, 10 percent, maybe 15 percent of your income? Or nothing. About 34 percent of U.S. adults don’t have any money in savings. And that’s a problem when an unexpected expense arises, you’d like to take a vacation, or you’re trying to save for retirement.

Tip: Pay yourself by saving some money every month. Budget for it just like your smartphone, WiFi connection, rent/mortgage or another monthly expense.

4. Save a few months of living expenses
If you don’t have three to six months of expenses saved, what’s your income plan if you lose your job, get injured, or have to take time off to help a family member?

It’s easy to think, “It won’t happen to me.” But chances are pretty good you know someone facing one of these challenges. And it could happen to you.

Tip: Save three to six months of living expenses. If that sounds impossible, start by saving enough to cover all your bills for a month.

5. Check your credit report
If you need a loan for a car, a house, or something else, your credit score matters. Check your credit report. Lenders look at credit scores to consider the risk of loaning someone money. If your credit score is low, you may have a hard time finding a loan or only qualify for high-interest loans.

Here’s a range of credit scores:

  • 300-579: Poor
  • 580-669: Fair
  • 670-739: Good
  • 740-799: Very good
  • 800-850 Excellent

How do you improve your credit score?

Pay your bills on time. Only borrow what you can pay back. And avoid carrying a lot of debt at any one time compared to your income.

Checking your credit score can also alert you to any errors on your credit report or potential identify fraud that can harm your ability to borrow money.

Tip: You can check your credit score with your bank, most credit card companies, and many online resources.

6. Pay your bills on time
It’s a basic concept. But a lot of people miss paying bills on time. And that can cost you a lot of money in late fees and charges. Use a calendar, reminders on your smartphone, or online tools to remember to pay your bills.

7. Get financial advice
If you’re planning to buy a home, invest, save for retirement, or take out a loan for something, get financial advice from an expert. You’ll learn a lot about your loan options, avoid making mistakes, and find the best option that fits your budget.

8. Save for retirement
When you’re young, you might not think about retirement much. But it’s an important part of your long-term financial plan. If you want to enjoy your senior years and cover medical costs, now is always the best time to start saving.

Tip: Take advantage of any tax-deductible contributions your employer may offer through payroll deduction to grow your retirement fund or 401(k).

9. Give your financial health a check-up
Wellness is never a one-and-done activity. It’s a process. Eat healthy, exercise, sleep well, and get regular check-ups. You know the routine. Your financial health needs a regular check-up, too.

  • Check your credit score.
  • Take a closer look at your spending habits
  • Evaluate your debt and assets
  • Review your income goals

Want to improve your financial health and wellness? Now is always the best time to start.

Sources


  1. Evans, A.C. (2017). Stress in America. The state of our nation. American Psychological Association. From: https://www.apa.org/news/press/releases/stress/2017/state-nation.pdf
  2. American Heart Association. (2014). Stress and heart health. From: https://www.heart.org/en/healthy-living/healthy-lifestyle/stress-management/stress-and-heart-health
  1. Stanley, T., et al. (2010). The Millionaire Next Door: The Surprising Secrets of American’s Wealthy. Lanham, M.D.: Taylor Trade Publishing
  1. Lock, S. (2019). Average spending on food away from home in the U.S. Statista. From: https://www.statista.com/statistics/937352/eating-out-average-spend-by-age-us/
  1. Allcot, D. (2019). Average credit card debt in the U.S. BankRate. From: https://www.bankrate.com/finance/credit-cards/states-with-most-credit-card-debt-1/