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Financial Wellness Road Map Healthy Habits and Strategies

In January, we offered our second workshop with Cape Cod 5 to continue our journey for financial wellness. This time we looked to Jim Curran, Financial Know-How Program Manager and Melissa Farrell, Treasury Management Officer to help guide us down that road. In this workshop our first stop on the roadmap discusses credit, credit scores, budgeting, and retirement.

“The best time to plant a tree was twenty years ago … the second best time is now.”


- Chinese Proverb

As always, this advice and information may work for most, but not necessarily for everyone. We encourage you to use this roadmap as a tool to evaluate, to re-frame or re-form, some healthy habits or to gain insight to begin implementing alongside existing financial tools you already have. The most important thing you can do is to evaluate your behavior and habits and be mindful with your money.

Melissa guided us through a credit score refresher and discussed each slice of the credit score pie. The credit score range is 300-850. Anything over 720 is considered above average. The lower your score could result in costing you thousands extra on just a 5k car loan. You should request a free copy of your credit report from each of the 3 credit reporting agencies to see where you stand.

The first two are the big ones and Melissa recommends concentrating your effort on those two, while keeping an eye on the other three:

1. (Payment History 35%): Pay All Bills On-time

2. (Credit Utilization 30%): Pay Down Balance & Use less than 25% of limit

3. (Credit History Length 15%): Maintain Old Accounts

4. (New Credit 10%): Don’t Regularly Apply for New Credit

5. (Types of Credit: 10%): Organically

It’s important to note that things like” employment status, income, and marriage or relationship status don’t have an impact on your credit score.

During our second stop, Jim ran us through some of the budgeting basics, “I’m sure we’ve all thought to ourselves, if I could just make 10% more a year or once my student loans are paid off, then I’ll feel financially secure, as it turns out, what normally happens is that we just allow more spending to creep in”!

Current statistics indicate that 28% of people making 40-55k are living paycheck to paycheck. You would think that an extra 150k/year would fix that yet 32% of those making at least 200k are also living paycheck to paycheck. To a certain level, there is an income we need to have our basic needs comfortably met. Beyond that, there is something more at play. With this in mind, we want to be mindful of our spending decisions and financial goals, which is why charting spending can help to see where that “extra 10% per year” ends up.

Here’s a good exercise to start off with basic budgeting:

  • Track your spending for a month, everything. Same with your income. Use whatever works for you: website, spreadsheet or a whiteboard.

  • As you chart, you might start to see patterns emerging: at this point, start thinking of determining needs vs. wants. One example of an easy place to start may be the recurring charges on services you no longer use. Ask yourself what is a true joy and what is mindless spending? Assign purpose to each dollar.

  • Cut ONE thing out of your monthly routine and compare the following month to see if there is any difference.

When looking at budgeting, a good partner to evaluate is debt management. A good question to ask regarding your debt repayment habits might be: Are you acting on a Debt repayment plan or just paying the minimum?

Something that has helped a lot of people attack debt is the “Snowball vs. Avalanche” method:

  • Snowball: pay off debts starting with the smallest balance. Once that is paid off, include that monthly payment amount in with the pre-existing payment amount for the next-highest debt.

  • Avalanche: pay off debts starting with the debt with the highest interest rate, regardless of balance. Either is fine, pick the one that appeals to you and works best with your life and habits.

Perhaps the most exciting aspect of budgeting is creating a savings plan, and Jim was happy to give us his success tips for building savings - his best tip: Pay yourself first. An easy way to pay yourself first is to sign up for employer-provided 401k or other retirement fund. When doing this, be sure to meet the minimum requirements for full match on retirement funds. Additionally, if you are enrolled in a high-deductible health insurance plan through your employer, be sure to ask about HSA or FSA availability; any funds contributed to these accounts are tax-free deposit, tax-free withdrawal and tax-free growth. Just as important, it will be there for medical appointments, expected or not.

Aside from work-related ways to pay yourself first, set some goals for yourself like starting or building on that emergency savings account (start with $1,000 goal and grow to maybe 3-6 months bills/funds) or a goal savings account like a vacation or Christmas club account.

It’s important to know what will suit your specific lifestyle so you will stick with it! Similar to diet, exercise, or any other personal resolutions, a good key is to start small and be consistent. Behavioral change is HARD.

Our last stop on our Financial Wellness Road Map is a quick crash-course in retirement, circling back to that HSA that we’d touched upon earlier. An HSA is retirement and emergency savings in one and because it is tax free, that means a 15% return right there! Most HSA programs have opportunities to invest the money collected and your investment grows on top of continued deposits.

Making sure that you’re enrolled in your employee-offered retirement program and ensuring that you are contributing enough to meet the maximum match are great fix-it-and-forget-it strategies to help build your retirement.

With all healthy habits, consistency is key - these financial habits are no different. Starting with a solid foundation for our futures begins with budgeting, credit management, and early retirement planning.

Jim and Melissa left us with a closing thought to keep in mind while embarking on the first steps to financial wellness:

Someone's sitting in the shade today because someone planted a tree a long time ago."


Warren Buffet


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