Americans spend more time thinking about finances than taking PTO

Learn how to consolidate your debt, build your credit and create an efficient emergency fund to improve your financial confidence.

What do you do when a financial disruption occurs? According to a survey conducted by Best Egg, a third of people (33%) feel paralyzed to act, especially when faced with an unexpected bill or expense (55%), medical emergency (52%), increase in cost of necessities (44%), bigger loan payments (37%), or job loss (36%).

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Best Egg, a fintech company that provides flexible solutions to real-life challenges, polled 2,000 Americans with limited savings (less than two months of liquid assets on hand) ahead of Financial Wellness Month.

The data found people spend an entire work month each year (about 19 days) thinking about their finances.⁽¹⁾ That’s more time than they spend on annual PTO, which is about 17 days.⁽²⁾

At the same time, only 45% of Americans rate their financial wellness as “excellent” or “very good.”

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What is financial wellness? Those polled defined it as being able to pay their bills on time (50%), maintaining good credit (47%) and being able to afford necessities (47%).

Regardless of how much you have in liquid assets and your household income, there are a few things you can do to improve your financial well-being and be prepared for any financial challenges that come your way.

Consolidate your debt

First, determine what types of debt you have. You can consolidate credit card debt, medical bills, tax debt and business loans, among others.

Then, consider using personal loans for debt consolidation. Unlike credit cards, these loans have a lower interest rate, which means you can get out of debt faster. Be sure to set specific goals to stay on track with your debt repayment plan.

Build and maintain good credit

Building credit isn’t just about making purchases on your credit card. When you pay your bills on time, including any payments on a car loan, your credit score will thank you.

You can also build credit as quickly as a few months. The benefits of having a good credit score are plentiful. However, a “good” credit score may differ by age, with older users frequently having a longer credit history.

“Everyone’s money situation is different and can change because of things we can’t always control. This can be stressful, especially if you don’t have a lot of savings. But don’t worry, there are ways to improve your situation and get better with money. The first step is to really understand your finances,” says Bobby Ritterbeck, President of Best Egg. “That means knowing how much you earn, how much you spend, and where your money is going. Once you know where you stand, you can make smart choices that make you feel confident and in control.”

Establish a reliable emergency fund

The study found that nearly a third (32%) of people rely on their savings to deal with financial disruptions, so being proactive about how much money you save is essential.

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High-yield savings accounts are a type of liquid asset and one of the best places for your emergency fund. They provide quick access to money when you need it most while allowing it to grow over time.

According to research by Finder, about 133.6 million employed Americans, or more than half of the population, can live off their savings for six months or less before going broke.

“The oldest advice is having at least three months worth of living expenses saved up in your emergency fund. But for many people, that’s a tough goal,” says Bethany Hickey, personal finance writer at Finder.com. “Finder’s Consumer Confidence Index found that 14% of Americans report that they couldn’t last a week on their savings alone, and only 9% said they could last at least three months.”

“If you don’t have an emergency fund at all right now, start small — even if it’s only $5 per paycheck,” she adds. “The goal when you’re first starting out is getting used to the habit of saving. You can also make it easier on yourself with small automatic transfers, and treat saving like a nonnegotiable expense. Once you’ve gotten used to saving, you can slowly increase your monthly contributions.”

The exact amount you save may differ based on factors such as the cost of essentials, including groceries, rent or mortgage payments, and utilities. Since inflation can affect the cost of living, the amount of money you need to have in liquid assets, especially for emergencies, can fluctuate.

If you have limited savings, you can add a realistic amount to your emergency fund each month that you’re comfortable with and still benefit from its growth over time.

Bottom line

Consolidating your debt, maintaining good credit and having a readily accessible emergency fund can optimize your financial wellness, increase your confidence and help you manage financial stress in times of uncertainty.

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