April is Financial Literacy Month, which is a great time to revisit your finances, learn more about your choices and make sure you’re making the most of your workplace benefits. While money management can feel overwhelming — especially amid an uncertain economic environment — it’s important to invest in your financial confidence and more clearly map out how every piece of your financial puzzle fits together.
No matter what your financial situation is today, there are steps you can take to help you prepare for the unexpected. Taking care of your finances can help relieve stress, provide peace of mind and set you up on a path to build a more secure financial future.
Consider these three tips to ensure you’re making the most of your financial resources:
1. Review spending and create a budget.
The first step to enhance financial know-how is to understand where your money is going. Review your income sources, debt payments, credit cards and bills. Utilize online tools such as debt calculators, retirement calculators and budgeting apps, which can help you track your monthly income and expenses. Your workplace benefits may include tools like these that you can use. Typically, you can also create a budget through your credit card app.
Next, separate fixed and variable expenses — this would be crucial payments like rent vs nice-to-haves such as going out to dinner. One popular method is the 50-30-20 budgeting rule: 50% of your budget would cover needs, 30% wants and 20% savings and investments. Break it down by month, paycheck or whatever makes the most sense for your lifestyle.
It’s important to understand that realistic budgeting takes time and is an ongoing project but can help keep you on track. Periodically check in on your budget and update as needed.
If you aren’t sure what the best path forward is, consider consulting with a financial professional, who can assess where you are today and how you can work toward your financial goals.
Your workplace may also offer access to professional financial coaching or advice, or additional financial planning benefits — for example, planning support through your 401(k).
2. Start setting aside emergency savings.
One of the easiest ways to prepare for whatever life throws your way is to set money aside for emergencies. Of course, this can be easier said than done: A Bankrate survey shows that more than half of U.S. adults (57%) feel uncomfortable about their current level of emergency savings.
Check with your workplace to see if they offer any savings programs or vehicles, such as savings accounts attached to 401(k)s. Consider opening a new savings account, money market account or CD account that’s just for emergency savings and keep it separate from your day-to-day checking or savings account, but somewhere that’s easy for you to access when you need it.
It’s also important to note that emergency funds shouldn’t be invested in stocks or bonds, because those assets are harder to liquidate, making it difficult to access quickly in an emergency.
Keep in mind that this is for when you are facing a large, unexpected expense – for example, car troubles, medical bills or a job loss. Morgan Stanley Wealth Management’s most recent investor pulse survey shows that 56% of U.S. adults would not pay an emergency expense of $1,000 or more from their savings. Alternatively, 35% would borrow money, and 21% would finance with a credit card and pay it off over time. Even putting away $10 a month can add up over time.
Once you dip into your emergency fund, it should be a priority to start replenishing it as soon as you are able to. While it’s OK to use it, life is unpredictable, so it’s important to keep it full.
3. Take advantage of your employer benefits.
Workplace benefits can be an accessible way to become more engaged and take greater control over your financial future. Morgan Stanley at Work’s State of the Workplace research shows that 75% of employees believe financial benefits are essential to meet their financial goals. However, 17% don’t know which benefits they participate in.
If you’re in the same boat, take this opportunity to educate yourself on your choices and learn more about what is available to you, such as health insurance, retirement benefits such as an employer 401(k) match, life insurance, disability insurance and more. Your workplace may offer additional benefits like discount programs, an emergency savings account match and equity compensation, which can help you cut costs or build investments over time.
Given the multitude of options, it can be challenging to know which benefits work best for your financial situation. Ask your employer if you’re unsure what your options are or where to start. Additionally, you may have access to a financial coach or adviser through your employer’s financial wellness or retirement program — in fact, nearly nine in 10 HR leaders offer financial wellness programs to help counterbalance work-life stressors, according to the State of the Workplace survey.
Ultimately, your workplace benefits are a tool that can enhance your financial situation and improve your overall well-being. As you build greater financial knowledge and awareness, every piece of your financial puzzle (including the workplace) can play a part in helping you more smoothly navigate life’s ups and downs.
This material has been prepared for informational and educational purposes only. As such, Morgan Stanley Smith Barney LLC (“Morgan Stanley”) is not acting as an investment advisor as defined under the Investment Advisers Act of 1940, as amended.
This material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (“Morgan Stanley”) recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
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