The Power of Budgeting

If we really understood the power of budgeting, we would always utilize a budget in our lives. Why? Because creating and using a budget helps employees reach their financial goals in manageable ways. Budgets are a tool that we can create and constantly tweak to meet our financial needs and desires.

By determining where we want to spend our precious dollars before we actually spend them, we effectively take control of our money. By assigning what amounts we want to go to housing, transportation, food, entertainment, savings, etc. we pre-determine how we will use our money. For example, if we know we want to take a trip, then we can establish a “trip” section of our budget. We can then budget to save $X amount each month towards that trip. We can anticipate the trip, get excited about the trip, and dream about it as we save toward our goal. Whatever we are “sacrificing” to save for our trip will be easier in having established a goal that we are working toward. 

Budgets are meant to be fluid and adapt with our ever-changing goals. They are tools allowing us to plan for and enact our individual financial desires. Their power is two-fold: first, in the utilizing of our financial goals in establishing our budget and second, in using our budget to guide our daily financial decisions. Budgeting our money before we spend it puts us in control of our money. Budgeting allows us to determine where we want our money to go before it goes anywhere.  If you are looking to be more disciplined and intentional with your money, a budget may be the key. And if you have budgeted in the past, but haven’t fully utilized your existing budget in a while, it may be time to make some tweaks to bring your budget up to date with your needs. If you need help, our tools and coaches can help you with a personalized budget.

We are here to help you,

Financially Fit Me

Managing Money as a Couple

It turns out that managing your money can be far harder to do in a relationship than is on your own. Why might that be? Because there is constant negotiation between what you value and what your partner values when it comes to our financial decisions. Think saving versus spending. Think eating out versus cooking in. Think exotic vacation versus modest staycation. Each of these choices has a monetary component attached to it. Will you agree as a couple when to save and when to spend? Will you both agree to set up automatic withdrawal into our 401k plan(s)? And if so, will it be only the minimum amount needed to receive any employer match or will it be closer to maxing the saving dollars? Will you decide to contribute to a Roth IRA plan(s)? And if so, how much? The same goes with any HSA savings plan, will you just barely contribute or save the annual max allowable? That’s just with your savings. You also get to negotiate how much we are willing to pay for rent/mortgage payments. Will you have a car payment or save and use cash to buy a car? Will you carry a credit card balance(s), etc. Each dollar we spend somewhere is assigned to something and cannot be re-spent. Much like our time, once we have used it, it is gone.

As an individual, you have incorporated one set of financial values into our lives, while your partner has incorporated their own set of financial values into their own life. These financial values are undoubtedly markedly different from one another. To some degree, these differences are inevitable as you are each raised in different families, thereby incorporating the financial values of those who raised you. These values are literally infused into our lives as you grow up within your environment. Some of those financial values serve you and your partners well, others not so well. Regardless, you will find yourself a “stew” of all these infused financial values in a committed relationship with someone else, who is also a “stew” of their own infused financial values. Oftentimes (more often than not) these “stews” clash. 

And although challenging, this isn’t necessarily a bad thing. Your partner challenging your financial values allows you the unique opportunity - a “gift” to examine them in a way perhaps we never have before. It also opens up the chance to question them and determine if they are compatible with your goals or not. Questioning your partner’s financial values offers them the same “gift”. How can you see this process as a “gift” instead of a fight for what you want versus what your partner wants (to buy, to save, to spend, etc.).

First, it helps to have these discussions theoretically when you are in a calm, happy place, versus when you are already in a heated argument. Discussing with your partner what you each want now and into the future is a great place to start. This helps to see your partner’s financial vision for a happy life and better understand what they value most financially. Almost undoubtedly it will be different than our own. However, in going through this process, we can

identify what common themes do you share with your partner? You can start by building on those.

Second, with the overarching shared themes in hand, it is critical to translate your joint visions into a budget - a tool to help you use your dollars to reach your actual goals. For example, if one of your shared goals is to own your own home, then you will want to begin to jointly save toward that goal. Saving toward this goal may involve giving up some things you had assumed were important individual financial goals of yours, ex: having extra spending money to buy things we want impromptu. This may continue to be important, but may become a lesser priority as you incorporate a joint vision with our partner and formulate new synergistic financial goals as a couple.

Third, just because you create a budget to have your money do what we want it to do for you, your work is not done. You need to set aside time regularly, at least monthly, to review your progress in implementing our budget in our daily lives. What adjustments do you need to make? Is there any room for improvement in how you are working to achieve our goals? Have our goals shifted and changed, morphing into something even more relevant in your shared lives than they were previously?

In summation, your partner’s different views on finances can be more of a blessing than a curse. You selected your partner, not because they are a mirror image of yourself, but because they offer an addition, an excitement, that provides you a more complete life than you have on your own. What your partner brings to the table financially is part of that package. As you listen to your partner and incorporate their views with your own views, you have the opportunity to use your joint finances to build an incredible life together.

We’ve got your back,

Financially Fit Employees

Open Enrollment: HSA Plans

It’s that time of the year when employees have options to make changes to their benefits. One benefit to not overlook, if available, is your HSA plan. It is well worth it to take advantage of a Health Savings Plan (HSA Plan) if offered by your employer. The max allowed to save for 2023 is $3,850 for an individual and $7,750 for a family. If you are age 55 or older (and not enrolled in Medicare), you can contribute an additional “catch-up contribution” of $1,000 annually. Building up an HSA plan each month then allows you to pay for your medical expenses from untaxed money because the money goes into your HSA account pre-taxed. And if you don’t need to spend it all on your healthcare expenses then you can save it year to year and at age 65 can withdraw it to spend it however you would like, without any penalties. The funds grow tax-free so you are never taxed on them! In this way, it becomes another “bucket” to save for both health-care expenses and retirement.

Even if you can only save $1, $5, or $20 a month in your HSA account, that is $1, $5, or $20 month you won’t be taxed on when you spend it for your healthcare - money you will have to spend either way. FYI, if you want to set up a monthly contribution to max your 2023 HSA savings as an individual over a 12-month period, then plan to have an auto withdrawal from your paycheck for $320.83 a month to fund your HSA account. If paid in 24 semi-monthly pay periods that would be $160.42 per paycheck. If paid in 26 bi-weekly pay periods that would be $148.08 per paycheck. If you want to set up a monthly contribution to max your 2023 HSA savings for your family (who is on your insurance plan) over a 12-month period, then plan to have an auto withdrawal from your paycheck for $645.83 per month. If paid in 24 semi-monthly pay periods, that would be $322.92 per paycheck. If paid in 26 bi-weekly paychecks, that would be $298.08 per paycheck. If you are age 55 or older and not on Medicare, and want to max your additional annual contribution, then you can add an additional $83.33 each month (on top of your individual or family contribution). If you are paid in 24 semi-monthly pay periods, that would be an additional $41.67 per paycheck (on top of your individual or family contribution). If you are paid in 26 bi-weekly pay periods, that would be an additional $38.46 per paycheck (on top of your individual or family contribution).

For 2024, HSA contribution limits will go up to $4,150 (a $300 increase) for individuals and up to $8,300 (a $550 increase) for family coverage. The 55 and older “catch-up contribution” will remain the same at $1,000. So if you are planning ahead for maxing out 2024 contributions as an individual, you will want to set up automatic contributions of $345.83 per month. If paid in 24 semi-monthly pay periods that would be $172.92 per paycheck. If paid in 26 bi-weekly pay periods that would be $159.61 per paycheck. If you want to set up a monthly contribution to max your 2024 HSA savings for your family (who is on your insurance plan) over a 12-month period, you will want to set up automatic contributions of $691.67 per month. If paid in 24 semi-monthly pay periods, that would be $345.83 per paycheck. If paid in 26 bi-weekly paychecks, that would be $319.23 per paycheck. If you are age 55 or older and not on Medicare, and want to max your additional annual 2024 contribution, then you can add an additional $83.33 each month (on top of your individual or family contribution). If you are paid in 24 semi-monthly pay periods, that would be an additional $41.67 per paycheck (on top of your individual or family contribution). If you are paid in 26 bi-weekly pay periods, that would be an additional $38.46 per paycheck (on top of your individual or family contribution). An HSA plan allows you to spend less (by using untaxed money) on your ever-growing healthcare costs. Let us know if you have any questions about whether opting for an HSA plan is right for you. 

We’ve got your back,

Financially Fit Employees

$1 Trillion in Credit Card Debt

Credit card debt continues to haunt many of us as prices on goods skyrocket. The Consumer Financial Protection Bureau estimates that credit card debt could hit $1 trillion. Credit card interest rates often vary between 20.94% - 27.92%. To put these rates in perspective, this means if we are carrying a $10,000 unpaid balance on our credit card that has a 27.92% interest rate, we are in essence really carrying a balance of $10,000 X 27.92% = $12,792. And we are paying approximately $232.04 in interest alone each month just to cover our interest payment. If we take 30 years to pay off that original $10,000 balance, we will ultimately pay $72,781.24 (with only 12% of our payments even chipping away at our balance and 88% of our payments devoted to our interest owed). Do we really need that new electronic, bauble, or trip if we have to put it on credit? Or can we save toward it, plan for it, and use a little delayed gratification to ultimately get what we want? Financial Freedom to budget our money and accomplish our financial goals. 

We've Got Your Back,

Your Financially Fit Employees Team

The Wealth of Wellbeing

What does the word “wealthy” mean to you? Likely, what first comes to mind is money. But is this really what wealth means? Ultimately, it's up for everyone's own interpretation. But what does the population say? What do members of society think the word “wealthy” means? According to a Barron’s survey, 48% of their respondents said they considered themselves wealthy. But, when respondents were asked more generally how much money it takes to be wealthy in America, their responses averaged out to $2.2 million. This is nearly four times what the self-described wealthy reported about their own net worth. Why is this? Well, some describe it as the “wealth paradox”. At first glance, you may be skeptical of what this means or the term may come off as negative, but this may actually be good news.

This survey shows that people are considering more factors besides just money when defining the word “wealthy”, implementing factors of their well-being into their personal definition. Jonathan Craig states that “Americans today aren’t as worried about keeping up with the Joneses, and more importantly, they understand that they can be happier with fulfilling experiences and relationships, even if they have less money”.

Schwab conducted a separate survey to help find answers to this paradox. Below is a list consisting of the top responses from Americans when asked to respond to the prompt “What wealth means to me”:

1. Not having to stress about money

2. Enjoying experiences 

3. Being in good health 

4. Enjoying healthy relationships with family & loved ones

In fact, “Having a lot of money” was actually the tenth and last response on the list. Most importantly, what has been discovered is that wealth is more about not having to stress over money, as opposed to having more of it. The saying is true, Money can’t buy happiness. Wealth is more than just dollars. Having a lot of money clearly isn’t a bad thing, but if having a lot of money is the only thing you have, it is less likely you are living a very fulfilling life. When it comes down to it, well-being and having a balanced lifestyle is what's most important.

Well-being takes planning, direction, and routine. Being your own coach and motivator is beneficial, but reaching out to a trained professional may help set you up for the best success. Individuals taking accountability for their personal financial wellness can utilize Financially Fit Me’s features to get in contact with one of our qualified coaches for guidance on best skills and practices that make it easier to adopt effective routines, while Financially Fit Employees can help companies improve their employees financial literacy through services that  develop attainable financial wellness habits for work and home life. Offering such services to your team can increase their confidence and productivity, while establishing a stronger sense of loyalty when they believe you have their best interest in mind. 

We’ve Got Your Back,

Financially Fit

FinTech: The Next Big Thing

 

FinTech Basics

Technology is becoming incorporated into almost every aspect of our lives. An article written by Columbia Engineering defines Financial Technology as the term representing software, mobile applications, as well as other technological advancements intended to automate and improve configurations of finance. Although it will be difficult for some to adapt to this style of living, learning how to acquire the proper knowledge and skills in order to utilize financial technology will be essential. A popular example of financial technology includes an app you may frequently use today. Venmo. Robinhood is another common application and trading platform that you may have heard of. It may seem as if financial technology is a new and recent finding, but the concept has actually dated back to the 1950s. This is when credit cards were first invented to the public for usage, and where fintech was introduced to the world.

How does FinTech work?

The goal of fintech is to ultimately streamline the process of financial transactions and eliminate unnecessary steps in order to optimize costs and accessibility. Some companies use fintech in the form of AI (artificial intelligence) in order to highly secure transactions in their internal network. In fact, today's fintech is primarily driven by AI, big data, and blockchain technology . These have all redefined how businesses store, transfer, and protect their digital assets. AI works by collecting data on consumers behaviors, therefore providing valuable information on their spending habits and allowing companies to better understand their customers . Big data analytics allows companies to predict changes in the market and create new business strategies powered by data (Columbia). Lastly, a newly introduced technology called blockchain, allows transactions to be dispersed without a third party’s opinions.

Learning FinTech

There are many fintech boot camps available for people who are looking to gain knowledge and experience in the area. Bootcamps offered by Columbia Engineering are particularly structured in order to provide hand-on experience for students possibly interested in a career in fintech. Most colleges also offer degrees with a concentration or focus in fintech as it is a growing industry. Free online courses are also available through multimedia apps and digital guides. This form of self-teaching may be ideal for those desiring an autonomous learning experience. Just keep in mind that time management and organization is essential in order to optimize self-teaching courses.

Programming, Cybersecurity, AI/ML, Data Science, and Blockchain are all important skills to acquire when accustoming oneself to fintech. There are an abundance of jobs and career opportunities in the world of fintech, and the median pay for a financial analyst was $83,660 in 2020 (Columbia). In fact, the field is expected to grow by 5% by 2029 according to the Bureau of Labor Statistics (BLS). You can also access financial fitness tools on our website in order to jump start your journey to success.

Getting Acclimated

It’s understandable that some people may not have their full trust in financial technology. Forbes states that 68% of people are willing to use financial tools developed by non-traditional institutions (Forbes). It is important to be careful when using financial technology, just like any other process involving money or personal information. If you are hesitant to use fintech due to safety concerns, remind yourself that the benefits generally outweigh the perceived risks.

We’ve Got Your Back,

Financially Fit

Financial Well-Being Mindset Shifts

People function and perform best when they have a clear, stable mind. Though unsurprising, this fact is much easier said than done. Accomplishing financial wellness and fulfilling financial goals will be hindered with anxiety-filled thoughts and insecurities surrounding all the jargon, skills, and secrets of the economic world you have yet to learn, potentially leading to poor financial decisions. So how can you prepare yourself  to make clear and concise financial choices? These decisions rely on a foundation of mental toughness.

As stated in Pan American Life Insurance Group’s article “10 Mindset shifts to improve your financial well-being”, Mental toughness is defined as being capable of controlling one’s thoughts and impulses, managing emotions effectively, and acquiring mental routines that promote productivity-focused behaviors. Fostering the tools to achieve the mental strength and ability to overcome financial adversity is something one will thank themselves for in the future.

There are a few skills that are essential when achieving mental toughness, like commitment, self-control, confidence, concentration, and pragmatism. The Pan American Life Insurance Group’s article provides 10 key aspects of financial stress which are listed below. These mindset shifts discussed in this article will allow one to overcome and better manage high-stress financial situations.

Key aspects of financial well-being include:

1. Be open to change and don’t close yourself off from new experiences.

2. Establish a budget. Having a budget will make you more aware of your expenses.

3. Access risks and watch for things that will hurt your long term success.

4. Only spend money on things you need and save money where you can, weigh your wants and needs.

5. Don't waste energy on things out of your control and only put energy into things you have power over changing.

6. Stop caring what others think. Comparison is the biggest thief of happiness.

7. Act according to your values and be consistent and stick to your word.

8. Set goals and let motivation guide you and look forward to achieving success.

9. Delegate responsibilities you can not manage and assign tasks to others that you are not able to complete on time. It’s okay to ask for help.

10.  Be content with what you already have and be grateful for your past achievements & how you got to where you are now.

These financial skills will enable you to make more confident financial decisions that will positively impact several other aspects of your life. The author of the article provides 7 aspects that financial experts use in their own lives in order to set themselves up for success.

Key aspects of developing mental fortitude in one’s personal life include:

1. Honesty

2. Continual learning

3. Emotional stability

4. Accepting others success rather than envying

5. Be prepared to win

6. Be prepared to lose, consequently

7. Think for yourself

Financial hurdles can be stressful and intimidating, but working towards mastering these skills will be very beneficial to one’s wellness and success overall. Start your journey today.

We’ve Got Your Back,

Financially Fit