With the unemployment rate falling to a relatively low level and the stock market having reached new all-time highs, one could conclude that 2017 was a pretty good year for working Americans. But new data tells us that a growing number of employees are actually less financially satisfied today than in the past.
According to a recent survey by consulting firm Willis Towers Watson, only 35% of workers said they were happy with their current financial situation. That’s a steep drop from the 48% of workers who felt the same two years ago. In fact, until recently, workers’ attitudes to their finances had been improving steadily since 2009, when the country was in the depths of the Great Recession.
Not only are fewer workers currently satisfied with their financial situation, but around a third believe their financial concerns negatively impact their quality of life. And nearly 60% of employees are actively concerned about their financial future.
If you are unhappy with your current financial situation, there are steps you can take to make things better before that unhappiness begins to seriously affect other areas of your life, such as your relationships or your performance at work. As we prepare to step into a new year, here are some suggestions of things you can do to better manage your finances.
1. Create a budget
Despite the fact that budgeting is one of the most effective money management tools around, the majority of Americans do not use it. If you’re worried about your finances, but currently don’t have a budget, set aside an hour and create one. Once you compare the details of your monthly expenses to the amount you take home in your paychecks, you’ll be in a better position to see where you’re overdoing and what expenses you need to cut back. Equally important, budgeting will give you a good idea of ââhow much money you could potentially save – and it could allow you to do better.
2. Establish a safety net
A common source of financial stress is the fear of being hit by an unexpected big bill that is beyond our means to pay. The best way to alleviate this worry, of course, is to put yourself in a position to cover those unexpected expenses: build up an emergency savings cushion. Regardless of your age or income level, you should aim to have a minimum of three months of living expenses available in the bank at all times. And if your income is variable or if you’re the sole maintainer in a household with multiple dependents, you might consider hitting your six-month living expense goal. Having that cash on hand will not only help you sleep better at night, but also keep you out of debt when costly problems arise.
3. Consistently save 15% or more of every paycheque for retirement
In the old days, saving 10% of every paycheque was enough to build a small nest egg. But given the rising cost of living for older people and their lifespan, a more conservative approach is to aim for 15% or more of every paycheck going forward. This is especially crucial if you’re halfway through your career and haven’t started funding a retirement account yet.
Fortunately, workers today have several tax-efficient options for investing for the long term. If your company offers a 401 (k), it is wise to sign up and have dues automatically deducted from your paychecks. This way, you’ll never “see” the money you want to save, so you don’t have to be tempted to spend it elsewhere. In 2018, the 401 (k) annual contribution limit will increase to $ 18,500 for workers under the age of 50. If you are 50 or over, you get a catch of $ 6,000 which brings the maximum to $ 24,500.
If you don’t have the option to save in a 401 (k), you can still invest money for your retirement in a tax-efficient way with an IRA. Although the annual contribution limits are considerably lower – $ 5,500 for workers under 50 and $ 6,500 for those 50 and over – if you are able to maximize those contributions consistently, you will take your retirement with a fairly strong account. And watching your balance go up might be the perfect solution to allaying worries about your financial future.
If you’re unhappy with your financial situation, it’s time to work on making positive changes rather than continuing to drown yourself in negativity. In many cases, improving your financial outlook comes down to taking more control over your finances and taking steps to increase your immediate and long-term savings. And the sooner you start, the happier you will be.