The Ultimate Checklist to Improving Your Finances — and Your Mental Well-Being

Savings | health care | Personal & Family Finances

 Daniel Lee By: Daniel Lee

Financial health is so intimately connected to mental well-being. This checklist can show you how to get a hold of your finances and, in turn, lessen your stress.

If you've ever experienced financial trouble, you know that that it can seriously affect your mental health. The stress that comes with organizing bills, paying unexpected costs, and saving for the future can be debilitating — and it's often chronic. One study found that 26% of Americans are stressed about financial challenges most or all of the time. Another survey by PwC found that financial or money matters/challenges is the top stressor of employed adults in the U.S.

Much like mental well-being, there's been an increased focus on financial wellness recently. But it can be hard to know where to start or how to get financially fit. The following financial planning strategy checklist can help if you — like many others — have struggled to get your finances in order:

Financial Health Checklist

1. Establish a safety net.

Part of what makes life fun is its unpredictability, but that unpredictability can wreak havoc on your financial plan. Protect your personal finances by setting up an emergency fund that will allow you to bend, but not break, in the event of an unexpected expense or lapse in income.

It's generally recommended that your emergency fund (or "peace of mind" fund, as one of my students calls it) can cover three to 12 months of expenses.

2. Get on track for future financial independence.

GoBankingRates reports more than 40% of Americans have less than $10,000 in retirement savings. A good rule of thumb is to save 20-25 times your annual expenses for retirement. While that can be a daunting task, remember that saving for retirement is a long-term goal — even small amounts can add up after many years. Start saving more today by contributing to a 401(k) or IRA.

3. Reduce your taxes.

Studying some basic tax rules can help improve your financial acumen and increase your wealth. If the thought of studying makes you want to rip your hair out, consider visiting a tax advisor. They can help you save time and undue stress, as well as minimize your tax liability so you can keep more of your hard-earned money.

4. "Take the raise" with your company benefits.

Taking advantage of company benefits can be a tremendous boost to your savings. Many employers will match 401(k) contributions up to a limit. It may not seem like much at first, but an extra $250 a month can add up to $300,000 over 30 years!

Other popular benefits include employer contributions to health savings accounts and special accounts that can save you money by avoiding income tax on healthcare spending and public transportation (including shared care rides).

5. Know your credit score.

It’s a good idea to keep an eye on your credit score, and it's never been easier with technology. Your score comes from three different credit bureaus — Equifax, TransUnion, and Experian — and each of them is required by federal law to offer one free report per year (you can get your report at AnnualCreditReport.com).

Websites like Credit Karma not only let you access your credit score, but also provide monitoring services that notify you of any changes.

6. Organize your records and paperwork. 

Fiscal planning is made easier by keeping adequate records. For example, the amount you contribute to an FSA is decided at the end of the year. It's much easier to determine that amount if you have an easily accessible, detailed record of what you spent in the past year in one.

7. Review repeating payments and subscriptions.

It may not seem like much, but paying $5 here and $5 there each month adds up quickly. The first step is to review and add up your repeating payments, then keep the services that are really necessary and unsubscribe from the ones you don't value.

8. Create aspirational and realistic budgets.

Creating a budget from scratch can be difficult. Instead, track your spending for a few months — online tools like Mintwill do that for you automatically. Then, use that information to create a budget and set some goals on ways you can save more. Don't forget to track your budget to see if your initial plan is working.

Budgets will change over time, so don't be afraid to modify it to be more realistic about what you can actually spend and save. The aspirational budget can be what you reach for in the future once you get your finances in order.

9. Get healthier.

Your health directly affects your finances, and your finances affect your health. In one study, people who saved for the future by contributing to a 401(k) showed improved abnormal blood test results and general health behaviors. Help yourself avoid costly long-term medical expenses by regularly exercising, eating right, and saving. 

10. Save for education.

College tuition continues to rise, often outpacing other costs of living. It may seem unimportant when you're considering how to get your finances in order but if you have kids, you may end up sharing responsibility for student loans. Prepare in advance by setting up a 529 college-savings plan.

This plan allows contributions to grow tax-free if they are used on qualified education expenses. Some states also allow a limited tax deduction on contributions.

11. Educate yourself on personal finance.

No financial planning strategy checklist would be complete without this step. Whether you’re opening a business, saving for retirement, or simply building wealth, it never hurts to learn about how to get your finances in order. Here are some educational books I recommend to get you started:

  • For an overview on personal finance: "Making Money Simple" by Peter Lazaroff
  • For investing: "The Intelligent Asset Allocator" by William Bernstein
  • For basic tax information: "Taxes Made Simple" by Mike Piper

Starting Small

Just like you would get into the habit of exercising or eating healthy, saving is a habit you form over time — not just a destination. Start small and focus on something you can keep up with, rather than taking on too much all at once. Small steps taken successfully will lead to larger accomplishments down the road.

Keep in mind that your priorities on the checklist may change over time. As long as you continue to track them, you'll be on the path to financial success and improved mental well being. If you need further motivation, think of the sense of peace that will come when you check something off the list.

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Disclaimer: This post originally appeared on Thrive Global. This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.

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Daniel joined Plancorp in 2019 after spending over a decade with a local Bay Area firm. He leads our Silicon Valley office and specializes in helping busy professionals optimize complex retirement and equity compensation plans. Daniel also researches socially and environmentally responsible investing for the firm. Daniel earned a BS in Economics and Biopsychology from the University of Michigan and completed the UC Berkeley Extension Personal Financial Planning program. More »