Debt: How to Fix Financial Unwellness

Stack of Coins for Financial Wellness

You come home from a long day of work, making your daily pilgrimage to the mailbox on your way to your door.

As you flip mindlessly through the envelopes and ads while walking up the driveway, a few bills and invoices catch your eye.

“Oh, I need to pay those.” 

Fortunately, there’s nothing too time-sensitive. Then you get to your credit card statement.

As you deftly tear open the envelope and withdraw its contents – “Did I pay last month’s bill? How much was it again?” – you feel your mouth go dry.

“Oh.” 

We’ve all been there, but that doesn’t make it any less terrifying.

It’s the epitome of financial unwellness – heaps of debt, impulsive spending, and the constant question: “what happened to my last paycheck?!”

Fortunately, even if your finances aren’t looking so hot right now, there are things you can start doing today to get out of the hole. For help on this, we talked to our Accounting Manager Ramon Bartolome.

Growing up in the Philippines, Ramon came to the United States in 1998 to continue his career in Accounting. He explains,

[As an immigrant with] five children to provide for, it [was] so easy to get sucked into debt. Every time something happened – if we needed to buy the kids new clothes, or the car broke down, needing to buy groceries, anything! – I would put it on the credit card. Pretty soon, I was just drowning in debt.”

Finally, Ramon had enough. “I began looking for answers, and what I learned completely changed what I thought about money.”

One of the most impactful resources Ramon found was Dave Ramsey’s Financial Education resources. Equipped with his freshly-learned knowledge and the excitement of starting something new, the Bartolome family immediately started making drastic lifestyle changes.

Now confidently in a state of Financial Wellness, Ramon is sharing four tips that made the biggest difference in his own financial journey.

1. Create a Budget

Impulsive Spending Debt Budgeting

We often find ourselves wondering where last month’s paycheck has gone and worrying about when the next paycheck will arrive. One way to avoid this constant state of dread is to create a budget.

Budgeting is a fantastic way to better understand and control where your money goes. However, if you’re like many people, bad experiences with budgeting in the past may have left you never wanting to open Excel again. If that’s the case, we’ve got good news! There are so many budgeting strategies out there. (The 50/20/30 Guideline is super simple!)

Budgeting requires work and discipline, but the results will absolutely give you greater control over your money. Do some research to find the level of detail that works best for you, then commit to it!

2. Save for Emergencies

Finance Debt Saving

Life happens. Sometimes we are met with unexpected expenses that threaten even the most carefully planned budgets. However, an emergency fund of even just $1,000 will provide some relief.

One helpful tip is to keep your savings and checking accounts at separate banks. When both accounts are at the same bank, it’s much easier to transfer funds. That means it’s also much easier to bend the definition of “emergency” to include “shopping emergencies” and the like.

You can also speak with your employer to see if it’s possible to have a percentage of your paycheck direct deposited to your savings account so this money never even sees your checking account.

The goal is to not touch your emergency fund unless absolutely necessary (e.g. rent payments if you become unemployed, your car breaks down, etc.).

3. Eliminate Debt

Drowning in Debt Fight Club

Much of the average person’s wages are allotted to consumer debt. Begin to work on paying down your debts, and you will soon have the freedom to allocate your money to your emergency fund or retirement. A good rule of thumb is to aim to save enough to pay for your expenses in cash.

If you cannot afford something, now is probably not the time to buy it. Instead of making the purchase now and paying it off over the coming months or years, you can do the opposite.

Start setting aside a certain amount of money (say, $100 per paycheck) until you have enough to pay cash. You’ll be saving on interest, and when you finally do make your purchase, you won’t have to worry about another monthly payment. Also, you won’t be out of luck if an emergency arises and you can no longer make a payment!

4. Retirement Planning

Retirement Fund

Most people severely underestimate the amount of money they should set aside for retirement. Once debt is out of the way, you can focus on building your retirement fund.

Experts recommend setting aside 15% of your income to invest in your retirement. If you have a 401(k) Plan with employer matching, be sure to contribute enough to take as much advantage of this free money as possible.

Even if you can’t put a whole 15% towards retirement right now, save whatever amount works for you (you can always increase later!).

Thinking of following that 50/20/30 Guideline we mentioned earlier? Then you’ll already be allocating 20% towards your financial goals.

By contributing 10-15% to your retirement fund, you’ll still have another 5-10% for other goals like buying a house or taking your dream vacation!

What do you think?

What do you think? Comment below to share your own experiences battling debt and building up your financial health. Want more tips and tricks to be financially well? Check out SDP’s unique employee financial benefits (free for employers!). With everything from wages on demand so employees don’t have to take out payday loans, to automated pretax spending that automatically puts money back in your employees’ paychecks (and helps you save, too!), we’ve got you covered.


 

Ramon Bartolome

Ramon joined the SDP family in 2000 as an Accounting Specialist reconciling SDP’s Trust Accounts. He began his 20-year accounting career in the Philippines and has held positions from Bookkeeper to Assistant Branch Manager, giving him extensive experience in banking operations and trust accounting. Ramon’s hard work and dedication to service has led to his current position as Accounting Manager. When he’s not at SDP, Ramon can be found pumping iron at Crossfit or spending time with his family. Next time you get him on the phone, say hello!


Disclaimer: Southland Data Processing, Inc. (“SDP”) is not a financial advisor. The above article is intended for informational purposes only and should not be relied upon in reaching a conclusion in determining individual financial decisions. Applicability of the principles discussed above may differ substantially in individual situations. Please consult with your financial planner prior to making major financial decisions. SDP is not responsible for any inadvertent losses that may occur due to application of the above information.

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