3 Steps to Become Financially Healthy

My #FinanceFriday segment is FINALLY here! I’ve been saying I wanted to start talking about Finance on this site for months now, but I let other things in my life distract me. Not anymore! After last Tuesday (Election Day -_-), we have to get our finances in order to help withstand hardships in the economy to come. I’m NOT a Certified Financial Educator or a Chartered Financial Analyst (CFA), but I DO have a Master of Business Administration degree with a concentration in Finance. Whatever I know and learn along the way, I will teach and would like you all to share this knowledge with your family and friends.

“Each one, teach one.”- African-American Proverb

I get A LOT of questions about how to start investing and I plan to break down terminology and strategies that every investor should know with this segment, but in order to invest money you have to have money, right? Let’s discuss 3 steps that will have you financially healthy enough to start investing and saving for the future.

          (1) Budget

If you are a Christian, you (maybe) live by the bible, well a budget is the bible in finance. Budgeting is a #MajorKey in taking control over your finances. You don’t have to have the most strict budget at first, start small. Look over your bank account/credit card statements and write all of your expenses down from last month (some banks already have this as a digital service on their website). Compare how much you spend to the income you make. Calculate how much you spend on food, travel, and other miscellaneous things. Looking at spending habits can help you understand where you’re overspending and help identify potential ways you can save more money. Make your first goal: “This month I’ll try to spend $400 on groceries and eating out instead of $600.”. Then as you get more comfortable with budgeting, establish certain limits you are willing to spend on each category and try your best to STICK TO IT. Just think about all the money you’re transferring into your savings account.

          (2) Have a Savings Account and/or Multiple Accounts

Having multiple bank accounts isn’t just a thing rich people do to hide money (joking, but for real), its a thing people who want to control where their money is going in and coming out do. A lot of people have a credit card as the card they use for everyday expenses like groceries and gas then use their bank account to pay their credit card bill and other bills. This is a good strategy if you are disciplined enough to not over spend on your credit card. I personally have never had a credit card and hope to never have one, because I am too afraid of having credit card debit (I’m sure I’ll write an article about my view on credit cards and building credit). If you’re like me and don’t see it for credit cards, open another bank account at a different bank. Put a certain amount of money in that account per month and use it for everyday expenses. That way, you’re in control over your spending without you even thinking about it. Use the other account for direct deposits and to pay major monthly bills. If you don’t want multiple bank accounts, open up a savings account…TODAY. Some banks have minimums on the amount you can start in your savings account, so after you’ve budgeted and saved (see #1), transfer the minimum you need to a savings account and DO NOT TOUCH IT! (unless it’s an emergency)

          (3) Establish an Emergency Fund

An Emergency Fund is savings of 3 to 6 months worth of expenses. Let me tell you from first hand experience, an Emergency Fund is the greatest piece of mind while looking for another job. When I graduated from grad school, it took me 7 months to find a job in Los Angeles from Jackson, MS. That job didn’t offer anything for relocation (I should have asked), but thankfully I worked a part time job while still living at home with my mother during grad school and saved most of the money I made. I used most of that money to relocate across the country with easy (and stress, because I hate spending, lol). Without that war chest, I would not have been able to ship my car, get my first apartment, or even have funds to eat before my first check came in from my new job. Emergency Funds help put your mind at ease during life’s trials and tribulations.

Once you’ve gotten more financially healthy, you’ll have more funds to invest and save for retirement. You don’t have to have all 3 of these established before starting to invest (because building an Emergency Fund takes a while), but you never want to invest money that you will need for rent next month. There are some aggressive investors that risk a lot and are Day Traders and Speculators, but I approach investing with the long term in mind. Whatever approach to investing you take, the 3 steps listed above will definitely help you get started.

Comment below and let me know what you’d like to learn from this #FinanceFriday segment and any questions you may have. No question is too “dumb” or small to ask! Like this website page on Facebook and follow me on Instagram & Twitter.