If you’re ready to financially prosper, join us for a multi-part financial series, Prepare To Prosper. In each article, we’ll discuss different ways to help increase your personal wealth including tips on saving, investing and credit along with guidance on entrepreneurship and homeownership. During this series, you’ll gain the tools and knowledge that will help give you the power to reach your financial goals. Now’s the time to change the way you approach and attain wealth. Now’s the time to prepare to prosper.
Article 1- Financial Health
Part 1: Improving your financial health
Before you can prosper, you need to understand your financial health. And Wells Fargo’s 8 Rules of Thumb to Financial Health are a good place to start. They provide easy-to-follow steps to help you increase savings, reduce debt and feel more confident about your finances.
Step 1: Pay Yourself First
Before paying bills or other expenses, pay yourself first by depositing 5-10% of your paycheck into your savings account. Doing this every time you get paid will add up over time and help you create a healthy habit of saving.
Step 2: Create a safety net
You never know when an unexpected event like a major car repair or large medical expense will occur, so having an emergency savings fund is important. Put away a small amount each week to create a separate emergency savings fund with 3-6 months of living expenses. One less latté or night out with friends can add up and help build your emergency fund.
Step 3: Pay on time, every time
Your payment history makes up about 35% of your total credit score. So make sure to pay your bills on time to protect your credit score, and to avoid late fees. Set up automatic payments to ensure bills are paid before they're due and pay at least the minimum balance every month on all of your accounts.
Step 4: Review your insurance annually
You work hard for everything you have, so be sure to protect it. To help secure yourself financially and protect those you love, consider homeowners or renters, auto, life, and umbrella insurance. Review your coverage yearly. As your life changes, your insurance needs may change too.
Step 5: Track your spending
Add up your monthly bills, such as mortgage or rent, insurance, utilities and phone. Then, track your personal expenses, such as groceries, gas, and entertainment. Review your expenses and consider whether an expense is a need or a want. This will help you find areas to reduce your spending and find ways to save.
Step 6: Pay Down High-Interest-Rate Debt
The higher your interest rate, the more money you’ll pay in borrowing fees. So make a plan to pay down your debt amounts with the highest interest rate first. After paying off the highest interest rate debt, move on to the next until all your debt is under control.
Step 7: Know Where Your Credit Stands
Credit scores are used to determine if you’ll qualify for a good interest rate on a home loan, car loan, or credit card. Plus, many insurance companies, cell phone providers, and landlords refer to your credit score to make decisions. So it’s important to check your report regularly and make sure your information is accurate.
Step 8: Save Sooner for a Better Retirement
The earlier you start to save for retirement, the less you will actually need to put away. Try saving at least 10% of your salary each year. Join your employers 401(k) plan if they have one. If your employer doesn’t offer a 401(k) you can open an individual retirement account (IRA).
Following these 8 steps could help you get on track to achieving your financial goals. When you improve your financial health, you can finally start to prosper and grow your wealth.
Get on the road to prosperity. The Prepare to Prosper financial series will soon return with a focus on Homeownership. We’ll discuss more tips and solutions for achieving your goals and building your personal wealth. For more, be sure to visit wellsfargo.com/financial-education/