DEVELOP YOUR FINANCIAL HEALTH TO STRENGTHEN YOUR PHYSICAL HEALTH
ROB WRUBEL, CFP®
Financial stress brings physical and emotional stress. And as any healthcare professional will tell you, chronic stress puts our health at risk. Limiting our stress, in all aspects of our lives, should be one of our goals. As a financial planner, I see that people who eliminate debt, build emergency funds, set up reserve accounts, and put money towards future goals reduce a major stress inducer in their lives—money fears.
Strong financial health comes from spending less than you earn, using some savings to reduce debt, and directing extra savings to emergency funds, reserve accounts, and future growth. This month, take an hour to improve your financial health. I expect you will find that by doing so your stress will go down and your enjoyment and pursuit of health and happiness will increase.
One technique that has brought me more financial comfort is setting up reserve or escrow funds.
We all know what an emergency fund is – an account with money to pay three to six months of living expenses should a disaster strike, such as losing a job and or undergoing an expensive medical procedure. The emergency fund replaces your lack of income while you search for work or recover from your medical procedure. Imagine the drop in your stress levels, knowing that emergency fund exists and that you will not be in danger of going bankrupt or over having your home foreclosed on.
Reserve accounts get less attention but are also valuable. A reserve account comes when you set aside a portfion of your income for the irregular expenses coming up over the next year or two. They reduce stress because they allow you to stay on track to fund lifestyle choices and events for your family.
Birthdays arrive at the same time each year; yet, how often are we unprepared for them"? Similarly, my children attend camp every summer, but I don't need to worry about how to pay for it because I have been using my reserve account to squirrel away the money all year long and so I can just write the check when the time comes to pay. Use reserve accounts to save money for any expense that comes up less than monthly, such as putting money aside to buy a new car, clothing, medical visits and a down payment on a house.
The key to a successful reserve fund is to track by category. You can have five, seven, or even twenty categories – whatever is needed to fit your lifestyle. Each category needs its own line to track, to prevent you from spending birthday present money on car tires. Spreadsheets such as Excel best track these accounts. Increase the line for each as you add money and decrease it as you spend it. It is straightforward.
Dollars are but simple pieces of paper. They have numbers, pictures and tiny lines on them telling us their value and making them hard to reproduce, but they are just pieces of paper. For so many, these pieces of paper represent fear and cause anxiety. A few easy actions on your part can tame the anxiety dollars cause and by taking these actions, you can remove one stressor from your life and move you from financial fear to financial peace.•
ABOUT THE AUTHOR:
Rob Wrubel is a CFP who has a daughter with Down syndrome. He is recognized as a leading expert on financial planning for families with special needs members. Wrubel has written two books about financial planning and special needs families — Financial Freedom for Special Needs Families: 9 Building Blocks to Reduce Stress, Preserve Benefits, Create a Fulfilling Future and Protect Your Family: Life Insurance Basics For Special Needs Planning — and he has been published recently by Law360.com and The Good Men Project. Wrubel holds the Certified Financial Planning (CFP®) designation, the Accredited Investment Fiduciary® (AIF®) designation from Fi360, and the Accredited Estate Planner (AEP®) designation from the National Estate Planning Council.