Financial Habits for Peace of Mind at Wellness Habits
At Wellness Habits, we focus on well-being in mind, body, and spirit. Today, we’re talking about financial habits that can bring peace of mind, especially for students dealing with debts.
Understanding the Debt Dilemma:
Many Americans face the challenge of credit card debt, averaging around $16,000. If you’re in a similar situation, it might feel like you’re drowning. The tricky part is that once you have debt, it’s easy to rationalize more.
Steps to Get Out of Debt:
1) Take Inventory:
- Check your savings. Do you have at least $1,000 for emergencies?
- Calculate your expenses and income for the last 3 months. No judgment, just gather the data.
2) Prioritize Your Spending:
- Categorize your spending into Needs (food, housing, minimum debt payments), Wants (car payments, phone), and Likes (entertainment, dining out).
- Track your spending using tools like mint.com or simple Excel spreadsheets.
3) Get Creative:
- Consider alternatives for high expenses like car payments. Can you go without a car, or downgrade?
- Look into more affordable phone plans and internet options.
- Evaluate expenses in the ‘like’ category. What can be eliminated or reduced?
Categorize Your Goals:
1) Create a budget that doesn’t exceed your income, prioritizing needs and minimal wants.
2) Start saving. Aim for at least $1,000 in an emergency fund.
3) Rank your debts. Start paying down one, either focusing on the highest interest rate or using the snowball method (starting with the smallest).
Dealing with Debt Reality:
- Realize that paying only the minimum won’t get you far. Consider reducing spending, increasing income, or both.
- Explore side hustle ideas to increase monthly income. Podcasts like Side Hustle Nation or Smart Passive Income can provide inspiration.
Your Action Plan:
- Create a budget based on your needs and wants.
- Start saving immediately, aiming for $1,000 in an emergency fund.
- Prioritize and start paying down one debt.
Today’s Homework:
- Set up a budget using the need/want/like categories.
- Begin saving with the goal of reaching $1,000.
- Rank your debts and choose one to start paying down.
Remember, small steps lead to big changes. You’ve got this!