Ann C. Alsina, CFP®, CovingtonAlsina
Ann C. Alsina, CFP®, CovingtonAlsina
In December, my daughters and I took a road trip out west, visiting National Parks to hike and climb. As we did this, I reflected on how our financial, physical, and mental health are all intertwined. When we’re feeling out of sorts, it’s hard to be financially prudent; it’s much easier to order in dinner or succumb to the lure of retail therapy.
Many large employers have seen a correlation between the financial stress of employees, productivity, absenteeism, and health care costs. Fifty-two percent of employees surveyed by MetLife said they were more concerned with their financial health in the wake of COVID than their physical, mental, and social health. To combat this, more companies are implementing financial wellness programs. A 2020 survey by the Employee Benefit Research Institute found that employers overwhelmingly have developed or are developing formal strategies to improve employees’ financial wellbeing.
But, if you don’t work for a big company with this robust benefit, maybe it’s time for a self-check. How is your financial health?
As you plan for 2021, take a moment to reset. A solid approach to this is with a financial fast.
A financial fast is when you only spend required money for set period, usually a month. If that seems extreme, try a week and see how it goes. You can pay your bills, buy groceries and gas, but that’s it. No eating out, no on-line shopping. If you don’t need it for work or school, don’t buy it.
Part of this is a mental reset, helping you see where you’re spending money. So much of what we spend is unconscious because it’s not real money that we see and touch. It’s a piece of plastic or just a stream of electrons. You can pay with a wave of your phone or watch. And that $3, $8, $20 purchase really isn’t that much. It’s when you add up all the little purchases that it becomes significant.
I’m never going to be the advisor who tells people to stop buying coffee out. You manage cash flow by paying all your bills, and then you can spend whatever is left each pay period, on whatever you want. The trick is not to stop buying a cup of coffee if that’s a thing you enjoy. The trick is to make savings for your goals part of your bills. And I mean all goals, not just retirement. If you want to help your kids with college, make a monthly contribution to their 529 part of your bills. If you want to buy a new car or boat, make a monthly contribution to a savings account part of your bills. Same for travel, a new home – any goal.
Whatever is left becomes fully discretionary. And if you really want a particular goal, you begin to make conscious choices. Do I want to buy this item or do that thing, or do I want to travel, or buy a boat? What you would have spent on that discretionary purchase goes into savings for the bigger goal.
The financial fast is an opportunity for a reset, and a time to see if you have aligned your spending habits with your values and goals. You’ll find more information and resources on our website, CovingtonAlsina.com, and Facebook page. If you have questions, we’re happy to talk with you. Email us at Info@CovingtonAlsina.com
Securities offered through LPL Financial. Member FINRA/SIPC Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. CovingtonAlsina and Great Valley Advisor Group are separate entities from LPL Financial.
