Who wouldn’t rather prevent a condition versus treating it? Some things are preventable with good habits and early detection.
Unfortunately, there is also rotten luck and genetics; although, that doesn’t negate the importance of preventative care. 😉
I propose that as we do preventative care for our physical and mental health, we can also do it for our financial health.
Prescriptions for our Finances
If there is a financial problem like debt or not enough money at the end of the month, we need to treat the problem. I’ve written several prescriptive articles pertaining to such things:
- A Roadmap out of Debt
- How to do Zero Based Budgeting
- Budgeting for the Future
- Budgeting with a Credit Card
- Financial Self Care in Recovery
However, once you’ve treated the problem and cleaned up your debt, you now get to focus on the prevention of these things occurring again. And I would argue that prevention is a bit more fun! 😉
Preventative Care for our Finances
How do we practice preventative care with our financial lives? There are several things we can do to make sure we maintain financial peace for ourselves and our families. Furthermore, I’m going to relate them to the typical preventative care we seek with healthcare.
Here are four ways to practice preventative care with your physical health as well as your financial health…
1. Have Insurance/Maintain an Emergency Fund
I think of health insurance as my emergency fund for, well, my health. I have a high deductible health plan so for minor check-ups, I pay out of pocket. Although, if God forbid, something catastrophic occurs, I’ll be covered by my health plan.
Having an emergency fund for my finances is temporary insurance for my income. Sure short term and long term disability insurance is actual income insurance, but an emergency fund serves the same purpose.
If you were to lose your job today, how long would your emergency fund sustain you?
I’ve found that as I get better and better with my budget, I have fewer emergencies. That is mostly because I budget for many foreseeable events. However, I am not immune to unforeseen emergencies so I maintain an emergency fund which covers about 6 months of expenses.
The key when using your emergency fund, is to replenish it.
How large should your emergency fund be? Well, a good rule of thumb is 3 – 6 months of your expenses. Some people even like a larger safety net of 1 year’s worth of expenses.
Figuring out your basic monthly expenses will be easy if you maintain a budget. Now subtract out all the discretionary (optional) expenses. If you were to lose your job, you can easily cut these out but you’ll still need somewhere to live, something to eat, utilities to sustain your environment, and transportation to get you around. Once you’ve calculated those monthly expenses, multiply it by 3, 4, 5, or 6 and save that amount!
2. Annual Physical Exam/Annual Financial Review
Just as we are advised to get annual physical exams and for the ladies a women’s well visit, we can also hold an annual financial review. The purpose of both is to make sure things are running smoothly.
Typically, this annual financial review will be done with your spouse and/or partner or in my case with yourself. However, you can additionally do it with a financial advisor or a mentor.
The things that can be reviewed at your annual financial review could be, but are not limited to:
- Are you on track with your debt pay off plan?
- What is your progress on your yearly goals?
- How is your career going?
- Re-balancing your asset allocation
- Are you on track with your retirement goals?
I will be holding my first annual review in June this year with myself. I will be doing most of it with me, myself and I; however, I’m thinking of bringing in a money mentor for a second opinion. You know how I feel about accountability!
Said money mentor has not been determined yet. 🙂
3. Eat Healthy & Exercise/Maintain a Budget
Most healthcare professionals will tell you that the most important things we can do to maintain our health are to eat well and exercise.
I once heard Dr. Wayne Dyer say something like, “you can either take the time to exercise when you are young or you can take the time to be sick when you are old.” Sure there are exceptions to this statement and I’ve got genetics to prove that.
However, it made an impression on me and I always take the time to exercise.
Budgeting certainly seems like a way to maintain your financial health.
I am a fan of budgeting and continue to maintain one even now that I’m out of debt. However, I know many people who simply hit their savings & retirement goals each month and live off the rest.
Whatever works for you, do it. However, if you choose the latter, I still highly recommend tracking your expenses. Reason being so that you can look at the things you are spending money on each year and decide if you need to improve.
If you are a redeemed debtor or spender, I highly recommend a budget. Budgets create discipline and build good habits. I’ve been doing it for several years and it’s mostly turnkey. I do have fun in trying to raise my savings rate each month.
“Discipline equals Freedom” – Jocko Willink
4. Maintain Healthy Habits/Automate Your Savings
Healthy habits in regards to your physical & mental health definitely include exercise & eating healthy but it also includes:
- Setting reminders for annual visits to different healthcare professionals.
- Preventative visits to chiropractors to maintain alignment (especially if you are prone to back problems).
- Recovery groups
Once you establish a healthy habit, it becomes automatic. Things that are automatic are easier. Take the time now to establish healthy habits.
I’ve written on the power of automation with our finances previously. It’s a powerful way to maintain good habits with your money and practice a preventative approach.
How can you do this? Well, for one, if you have access to an employer-sponsored retirement plan, you can pick your percentage of contribution or dollar amount and have it taken out pre-tax each pay period. It’s lovely as you never see that money.
Secondly, if you have a Health Savings Account (HSA) compatible health plan you can contribute to an HSA account. Additionally, you can have this taken out pre-tax each pay period. Check with your Human Resource (HR) department to see if they’ve set up company-sponsored HSA accounts with a particular bank. If not, you can open one of your choosing and give your HR department the necessary account information so you can have your contribution automatically withdrawn pre-tax.
Thirdly, if you have an Individual Retirement Account (IRA) with Vanguard or another servicer, you can typically set up automatic withdrawals from your checking account into your IRA account. Check with your accountant to see if you qualify for a tax deduction at tax time.
Prevention can take us far in life with our physical and mental health. Additionally, it can serve us well if we apply preventative practices to our finances.
Healthy habits are formed out of intention and bad habits are born from laziness. Prevention takes effort on the front end but can build a well-oiled machine for years to come.
I know I just reminded everyone of my posting schedule on my bloggerversary post, but I have an update. I’m going to be pausing my Thursday posts so I can work on some other financial projects. They are all things I’ve announced like:
- Cleaning up old blog posts
- Working on writing a book
- Writing curriculums for teaching financial literacy to women in recovery
- Financial coaching?
- Organizing the site to make it conducive to finding beginner & intermediate topics
I’m finding that I’m a little exhausted and I’m not achieving all my goals so I need to re-evaluate & prioritize these things.
That being said, I’ll still have my Monday posts going strong. Furthermore, as I clean up old posts, I’ll promote them as well.
Thoughts? Questions? Concerns? Hate it? Love it?