One aspect of self-care that isn’t covered as often is financial self-care. You might not think that finances are fun, or in any way related to self-care. But financial self-care is a critical aspect. When your money is a mess, the rest of your life ends up in turmoil as well. Without knowing where you stand financially, everything from basic necessities to relaxation and fun are unstable.
Financial self-care doesn’t have to be difficult. In fact, just five simple steps can set you straight so that your finances are no longer a tangled worry. Follow them (preferably in order) and relax, knowing that money is off your list of things to panic about.
How much are you worth right now? Do you know? Tally up all your assets and debts and figure out what you’re worth if you don’t already know.
· Cash on hand and in all bank accounts
· Vehicles including boats, planes, etc.
· Real estate, including the home you live in if you own it
· Other possessions of value, such as jewelry, electronics, art, etc.
· Anything that could be liquidated to provide you with cash
· Stocks & bonds
· Credit card balances
· Loans including personal, student, home, and auto
· Monthly bills such as electric, cable, cell phone, insurance, etc.
· Money you owe to other people
· Payday advances
· Medical bills
· Court judgments and garnishments
Calculating your assets and debts and subtracting the debts from the assets will give you your net worth. It’s important to know this number because it helps you avoid getting yourself into more debt than you can afford.
While net worth is important to know, it’s also important to know how much money you have access to easily. For example, real estate, vehicles and bonds are all part of your net worth, but if you needed cash this instant, they wouldn’t do you much good. You have to sell them, borrow against them, or otherwise make them liquid and that usually requires time.
Know how much cash you always have in checking and savings accounts. This tells you what money you can access by writing a check, visiting an ATM or making an online funds transfer. Having that figure will make you much more confident about what you spend and what you save.
What do you value spending money on? Some things are necessary, such as paying rent or a mortgage, buying food, and buying hygiene products (general and feminine). Other things are necessary, but flexible, such as clothing, a phone, and a vehicle. Other things are unnecessary and matter based on our own preferences, such as streaming services and expensive dinners or nights out.
Obviously, you’ll make sure the money you need for necessities like keeping a roof over your head and food in your belly is a priority. Beyond that, though, you need to set boundaries by prioritizing the other things you want to spend your money on.
Do you prefer manicures over expensive nights out with friends? Books over massages? Expensive sheets on your bed instead of brand name foods? Experiences over material possessions?
Decide what you value spending your money on and set boundaries. If you prefer manicures to nights out with friends, learn to ignore any FOMO you might have and stick to your weekly nail session. If you’d rather have experiences over possessions, minimize what you own so you can have more experiences.
It helps to write these boundaries out so when you’re tempted to do something outside them, you’re reminded of what matters to you. You might change your mind and stray outside the boundaries now and then — but it’ll be by choice, not because you don’t know what matters to you.
After you’ve figured out your worth and set boundaries around what matters and what doesn’t, it’s time to create a budget and follow it. Your budget starts with the things you must have:
· A roof to live under
· Food to eat
· Money to access some form of transportation
· Clothing appropriate for the climate and season
· Other needs specific to your situation, such as childcare and health insurance
· Payments toward debts you owe, such as credit cards and loans
Then you add in the “extras.” Extras are those things that aren’t required for survival but that you enjoy, or that are required for survival but you want to go beyond the basics. This might be extra money for more expensive clothing or it might be money for massages or books or streaming subscriptions.
Don’t forget to include savings in your budget.
Whatever your budget looks like, it should be what works for you.
There are many forms of debt. Credit cards, student loans, vehicle loans, mortgages, borrowing money from friends or family, and payday advances are the immediate ones that come to mind. Some are viewed as necessary, while others aren’t. For some people, they’re a way to survive from one paycheck to the next. If that’s you, it’s time to break that cycle.
With a budget, you should be able to make a plan to get out of debt. There are plenty of ways that people recommend paying off your debt. The key is for you to have a plan that is workable for you. It should allow you to pay off your debt without tightening your belt so much that you feel like can’t breathe.
But it should also allow you to pay off your debt as quickly as possible. Some debts, like mortgages, may not be eliminated quickly. Instead, look for the debts that you can pay off more quickly, like payday advances, friend and family loans, and credit card balances.
Once you pay off those debts, work on staying out of debt going forward. Use credit cards sparingly and wisely. Avoid payday loans. When you contemplate using a credit card or applying for a loan for something, ask yourself if it’s something you really need right now or if it can wait until you save up the money for it.
After you’ve paid off all the debt you can, and you’re feeling good about being (mostly) debt-free and having a solid budget, it’s time to look at setting some savings goals. We talked about savings briefly in the section on budgets, but now it’s time to think about it more seriously.
You need to set money aside for an emergency fund — this should be about 3–6 months worth of expenses in case of a job loss or major health issue that prevents you from working. It can also be helpful in the event of a divorce, natural disaster, or other sudden and unexpected significant event.
You should also start or add to retirement savings. Whether you’re in your 20s or your 40s, planning for your retirement is self-care for the future you.
You might also consider creating a couple of other savings goals and accounts. For example, a savings account dedicated to vehicle repairs can be a huge help. One for gifts is also a great idea as it allows you to set money aside for holiday and birthday gifts and keep both the funds and budget separate from the rest of your money.
A general savings account without a specific purpose is also a good idea. This gives you money that you can play with, dabble in investing, or to use if something happens that drains one of your other savings accounts.
Most people don’t find finances to be sexy or fun. But staying on top of your money allows you to do the things you do find sexy or fun. It may not seem like self-care, but I promise, when you get your finances in order, everything else in life becomes so much easier. Give it a try and see how it goes.