Most people would agree that spending money is easy; managing it is often another story. Yet some of the seemingly small decisions that you may be making about your finances could have a major impact on your life today—and on the options you may have years down the road. How you manage your money plays a significant role in helping you to create financial well-being in your life. Here's why:
1. Stuff happens. Fewer than 4 in 10 Americans (39%) could comfortably cover a $1,000 unexpected expense with their savings, according to Bankrate's January 2021 Financial Security Index.1 An emergency fund can help create a financial buffer that can help you weather an unexpected expense or loss of income—and help you avoid having to take on debt or take an early withdrawal from your retirement savings.
How to get started? Set a goal to have enough money in a separate account to cover at least three to six months' worth of living expenses. If you're expecting to receive a stimulus check and/or tax refund, consider using all or part of that money to seed your emergency savings account. Add to your account by moving any extra money you may have in your checking account each month after expenses are paid to your emergency fund. And look for simple ways to redirect some of your spending (maybe skip takeout once a week) to boost your emergency savings even further.
2. Financial worries snowball. A recent survey found that more than 8 in 10 Americans (84%) are stressed about their financial situation.2 When financial stress is weighing you down, you may become hyper-focused on the unpaid bills and unopened credit card statements, which may only add to your feelings of stress.
How to put your finances on a better track? Whether you prefer paper and pen, a spreadsheet or an online app, track your income, debt and spending for at least a month. Creating a detailed inventory of your finances will give you a clearer picture of where you stand, provide a road map for sound financial decision-making and help you gain greater control over your situation.
3. The future will come faster than you may think. The National Institute on Retirement Security reports that more than half of Americans (56%) are concerned about achieving financial security in retirement, and nearly two-thirds (65%) expect to work past normal retirement age as a result.3
How to retire when and how you want? Your retirement plan at work is one of the most powerful tools you have for creating a financially secure future. Now is a good time to revisit your plan to make sure you're maximizing your opportunity to save. If you reduced or paused contributions during the COVID-19 crisis, restart your plan as soon as you're able. (How about today?) If your employer offers a matching contribution, make sure you're socking away enough to take full advantage of this benefit. And if you're age 50 or older, consider boosting your contribution rate to leverage the catch-up provision that allows you to set aside even more for retirement.
4. Your credit history can work for—or against—you. If you're like most people, many of the most expensive purchases you'll make in your life will be financed, whether it's a house, a car or college tuition. Banks and other lenders typically rely on your credit score when determining your eligibility for a loan. Having a good credit score can get you better terms for your loan—while having a fair or bad one could end up costing you a bundle or, worse still, prevent you from qualifying for a loan in the first place.
How to put yourself on the right side of the credit equation. If your credit score is lower than you'd like it to be, one of the easiest ways to bring it up is to pay your bills on time. Those bills include not just your credit cards but also your rent, cell phone bill, utilities and more. If you miss a payment by 30 days or more, call your creditor immediately and get current on your account ASAP. This is crucial because late payments can stay on your credit reports for seven years, hurting your score.
Managing your financial well-being is essential to building the life you want today and in the future. Mutual of America offers practical educational materials on topics such as credit scores, financial goals and student loans through its Money Starts Here series. Ask your local Mutual of America representative about these and other ways to help you take greater control of your money.
2 National Endowment for Financial Education (NEFE). October 7, 2020.
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Mutual of America's group and individual retirement products are variable annuity contracts and are suitable for long-term investing, particularly for retirement savings. The value of a variable annuity contract will fluctuate depending on the performance of the Separate Account investment options you choose. Upon redemption, you could receive more or less than the principal amount invested. A variable annuity contract provides no additional tax-deferred treatment of benefits beyond the treatment provided to any qualified retirement plan or IRA by applicable tax law. You should consider a variable annuity contract's other features before making a decision.