Financial Wellness Check: 7 Signs You’re On Track

Money troubles got you feeling down? Don’t worry, we’ve all been there. As millennials, we’re constantly juggling expenses like student loans, sky-high rent, and yes, even those irresistible avocado toasts. But fear not, my financial warriors! Today, we’re going to do a quick check-up to see if you’re on the right track to financial wellness.

Sign 1: You Have an Emergency Fund

Let’s start with the MVP of financial stability: the emergency fund. Think of it as your personal safety net, ready to catch you when life throws a curveball your way. 

Whether it’s an unexpected car repair, a sudden job loss, or a medical bill, having 3-6 months’ worth of living expenses saved up can be a total game-changer.

Not only will it give you peace of mind knowing that you have a cushion to fall back on, but it’ll also help you avoid the dreaded debt spiral that can happen when you’re forced to rely on credit cards or loans to cover unexpected expenses.

Building an emergency fund might seem daunting, but it’s all about starting small and being consistent. 

Try setting up automatic transfers from your checking account to a dedicated savings account, even if it’s just $25 or $50 per paycheck. You’d be surprised how quickly those small amounts can add up!

Sign 2: You’re Saving for Retirement

Okay, I know what you’re thinking: “Retirement? But I’m still trying to figure out how to afford rent and pay off my student loans!” Trust me, I get it. The idea of saving for something that’s decades away can seem like a low priority when you’re just trying to make ends meet.

But here’s the thing – the earlier you start saving for retirement, the better. Even if it’s just a small amount each month, those contributions will grow over time thanks to compound interest (it’s like magic!). And the more time your money has to compound, the bigger the potential growth.

Many employers offer retirement plans like 401(k)s, which can make saving a breeze. Not only do these plans allow you to contribute pre-tax dollars (which means more money in your pocket now), but many employers also offer matching contributions up to a certain percentage of your salary. That’s essentially free money just for participating!

Sign 3: You Have a Budget and Stick to It

Budgeting might not be the most exciting topic, but it’s a crucial step towards financial wellness. 

Think of it as a roadmap for your money – it helps you keep track of where your hard-earned cash is going and ensures that you’re prioritizing your goals (whether it’s paying off debt, saving for a down payment, or treating yourself to that fancy coffee maker you’ve been eyeing).

Creating a budget doesn’t have to be complicated. Start by tracking your income and expenses for a month or two to get a clear picture of where your money is going. Then, categorize your expenses into needs (like rent, utilities, and groceries) and wants (like dining out, entertainment, and those daily coffee runs).

Once you have a clear understanding of your spending habits, you can set realistic limits for each category and make adjustments as needed. And don’t forget to factor in savings goals, whether it’s for an emergency fund, retirement, or that dream vacation you’ve been planning.

Plus, there are tons of budgeting apps out there that make the process super easy (and dare I say, even fun?). 

Apps like Mint, YNAB, and PocketGuard can help you track your spending, set budgets, and even provide personalized insights and recommendations.

Sign 4: You’re Minimizing and Managing Debt

Debt can be a real downer, but it doesn’t have to be a permanent fixture in your life. If you’re carrying credit card balances, student loans, or other forms of debt, it’s time to get serious about tackling it.

One popular strategy is the debt snowball method, where you focus on paying off your smallest debts first while making minimum payments on the larger ones. 

As each small debt is paid off, you “snowball” the amount you were paying towards the next largest debt, and so on. This method can provide a psychological boost as you see your debts disappearing one by one.

Alternatively, you could try the debt avalanche method, where you prioritize paying off the debt with the highest interest rate first. This approach can save you more money in the long run by minimizing the amount of interest you pay over time.

Whichever method you choose, the key is to be consistent and disciplined with your debt payments. Consider setting up automatic transfers or payments to ensure that you’re consistently chipping away at your balances.

And once you’ve conquered those debts, make a pact with yourself to avoid accumulating new ones. Live within your means, and if you do need to use credit, be sure to pay off the balance in full each month to avoid accruing interest charges.

Sign 5: You Have Adequate Insurance Coverage

Okay, I know what you’re thinking: “Insurance? Isn’t that for old people?” But hear me out – having the right insurance coverage can be a total lifesaver (literally). From health insurance to renters insurance, these policies can protect you from financial catastrophe in the event of an unexpected illness, accident, or natural disaster.

Health insurance is perhaps the most crucial type of coverage, especially if you have any pre-existing conditions or plan on starting a family. While the premiums can be costly, the potential medical bills you could face without insurance can be financially devastating.

Renters insurance is another important consideration, especially if you live in an area prone to natural disasters like earthquakes or hurricanes. 

This type of policy can cover the cost of replacing your belongings if they’re damaged or stolen, as well as provide liability protection in case someone is injured in your home.

Many employers offer affordable insurance options, so it’s worth checking out what’s available to you. And if you’re self-employed or your employer doesn’t offer coverage, be sure to shop around and compare plans to find the best fit for your needs and budget.

Sign 6: You’re Building and Maintaining Good Credit

Your credit score might not seem like a big deal now, but trust me, it’ll come in handy when you’re ready to take on major financial milestones like buying a car or a house. 

A good credit score can open doors to better interest rates and loan terms, potentially saving you thousands of dollars over the life of a loan.

To keep your score in tip-top shape, make sure to pay your bills on time (even just one late payment can have a significant impact), keep your credit card balances low (experts recommend keeping your utilization below 30% of your total credit limit), and avoid opening too many new accounts at once (which can be seen as a risk by lenders).

It’s also a good idea to check your credit reports regularly for any errors or signs of identity theft. 

You’re entitled to one free credit report from each of the three major credit bureaus (Experian, Equifax, and TransUnion) every year, so take advantage of this opportunity to stay on top of your credit health.

Sign 7: You’re Investing for the Future

Investing might seem like a daunting task, but it’s actually a smart way to grow your money and beat inflation over time. Even if you’re just starting with a small amount, investing in a mix of stocks, bonds, or mutual funds can pay off big in the long run.

One of the easiest ways to get started is by contributing to a retirement account like a 401(k) or IRA. These accounts offer tax advantages that can help your money grow faster, and many employers even offer matching contributions (essentially free money!) for their 401(k) plans.

If you’re not quite ready to dive into individual stocks or funds, consider starting with a robo-advisor like Betterment or Wealthfront. 

These services use algorithms to create and manage a diversified portfolio based on your risk tolerance and investment goals, making it a hands-off approach to investing.

And don’t forget about the power of compound interest! Even small contributions made consistently over time can add up to a significant nest egg thanks to the magic of compounding.

If you’re checking off most (or all!) of these signs, congratulations! You’re well on your way to financial wellness. But even if you’re not quite there yet, don’t sweat it. Financial wellness is a journey, and every small step you take towards better money management is a victory worth celebrating.

So, what are you waiting for? Grab your favorite beverage (preferably not a $6 latte), and start taking control of your finances today. Your future self will thank you!