5 Ways to be a Financially Responsible AdultSeptember 22, 2017
This is a sponsored post written by me on behalf of Health I.Q. All opinions are exclusively my own.
Schoolwork might teach you to solve math equations & critically analyze a piece of literature, but as I’ve said in the past, classroom lessons don’t prepare you to be a financially-responsible adult. When I graduated college, I did not understand the importance of a credit score, the need for a life insurance policy or how best to contribute to an emergency fund. I learned these things by reading a ton of financial self-help books and by trial & error over many years. Today, I will share my top five tips for being a financially-responsible adult. Don’t worry- these tips are easy & straightforward.
5 Ways to be a Financially Responsible Adult
1. Create an emergency fund!
An important component of being financially-responsible involves being prepared for the unexpected. Do you have the cash to pay for that car repair bill? How will you handle the medical costs of that unexpected root canal? Creating an emergency fund is a smart way to stay prepared for large expenses that come along with being an adult. Not sure how to create an emergency fund? Here are some smart tips to make the process nearly effortless:
- Save all the change. When paying with cash at retailers, collect all the change and fill a jar with it. Once full, bring it to the bank and deposit it. You’ll be surprised how quickly the coins add up!
- Getting a substantial tax refund? Don’t spend it. Simply deposit the majority of it into your savings account.
- Set up an automatic monthly transfer from your checking account to your savings account. You won’t have to do any extra work and the savings will accrue over time.
- If you’re struggling to find extra money to contribute to an emergency fund, see if you can get a few extra hours of overtime work at your job. Alternatively, maybe you have a hobby that you can monetize and pocket the proceeds. Look for ways to supplement your main income.
2. Purchase life insurance!
A life insurance plan is a fundamental component of every sound financial picture. In the event of the death of a loved one, life insurance can cover final expenses (funeral and burial costs can run into the tens of thousands), lost income, debts (mortgage for the shared home), and more. I recently discovered Health I.Q. and I love that they offer life insurance policies for health conscious people (those that actively manage their health). Did you know that an overall healthy lifestyle leads to a 66% lower mortality risk*? The folks at Health I.Q. understand the powerful impact of a healthy lifestyle and are rewarding those individuals with lower premiums on life insurance policies.
When it come to life insurance policies, it’s a good idea to use the common multiple of 7-10x your salary as a guideline, according to BankRate. Another way to look at it is that the face value of a life insurance policy should be equal to the after-tax income you would have earned had you lived a full life (as long as you can afford those annual premiums). Have more questions about life insurance premiums? Be sure to check out the blog at Health I.Q., where you can learn about how life insurance rates are affected by BMI (body mass index) and pre-existing conditions.
The methodology behind Health I.Q.’s pricing systems is actually quite sophisticated. First, the questionnaire includes four distinct health categories: Nutrition, Exercise, Medical and Integrative. The questions are designed to quantify the client’s skills and knowledge… in a very unique way. Whereas a traditional life insurance question might ask for the number of times an individual overeats, the Health I.Q. question might focus on an individual’s knowledge of food prep & portion sizes.
Question difficulty is calibrated with over 1 million health conscious people. Scores are also affected by the number of self-reported hospitalizations. The most predictive topics (eating hacks, for example) are weighted more heavily than other less predictive topics (stress, for example). All of this data is entered into an algorithm to determine a user’s Health IQ score. A high health IQ score can save a client money on life insurance.
Here are some reasons why I’m loving Health I.Q.’s unique position in the life insurance industry:
- They offer exclusive rates for athletes, swimmers, runners, and more.
- They focus on your health, minimizing the effect of an adverse family history.
- They reward those successfully managing chronic illnesses (diabetes, hypertension).
- They boast wonderful customer service reviews by streamlining the whole process for the user.
- They partner with top insurance carriers to offer you very competitive prices.
If you’re in your 20’s or 30’s and think that you don’t need to bother with life insurance, think again! Life insurance is not something that most millennials think about every day, but they should- and here’s why! When you’re young & healthy, your insurance premiums are relatively low, so it’s wise to lock in these low rates for the next 15 or 20 years. You can always add more insurance coverage later on.
In fact, my husband’s term life insurance policy is expiring this year so we are in the market for a new plan right now. We will definitely be checking out Health I.Q., as my husband is a runner and weightlifter! If you’re into fitness too, be sure to check out Health I.Q. today!
3. Monitor your credit report!
Your credit report is an important measure of your financial savvy-ness. It tracks your credit to debt ratio, whether you’ve had any missed payments, how long your credit card accounts have been open, and more. There are many occasions when your credit score may be checked: when you rent an apartment, when you apply for a credit card, when you purchase a home, etc. Be mindful of your credit score and work on improving it. For example, always pay off your credit card balances every month and don’t open too many credit card accounts.
4. Contribute to a retirement account!
A retirement account is a smart way to put money aside for your golden years. If your employer offers a 401k, be sure to contribute at least up to the employer-match percentage. Contribute even more if you can! If you are self-employed, open up a traditional IRA or a Roth IRA. You can set one up at most banks and investment houses.
5. Shop wisely!
Don’t make impulse purchases at the store. Practice smart shopping habits:
- Don’t buy a brand new car. Instead, opt for a one-year old vehicle with low mileage. You’ll still get a very reliable vehicle, without paying a pretty penny for a brand-new car.
- Shop the store circulars. Check out what’s on sale at the supermarket each week and plan your meals / recipes around the items on sale.
- Clip coupons for everyday household essentials. You can almost always find coupons for paper towels, toothpaste, deodorant and makeup. If you find a really great deal, be sure to stock up!
I hope these tips have inspired you to make some simple changes that will boost your savings and prepare you for the future.
Now, I’d love to hear from you. Do you have life insurance? How do you avoid impulse purchases at the store? Do you contribute to a retirement account?
*Statistic on the homepage of Health I.Q.