The Importance of Financial Wellness
Financial wellness is the term used to describe a healthy financial life. It refers to having a well-rounded financial plan and managing your money effectively. Financial wellness is essential for individuals and families because it can help you feel comfortable and stable financially.
When it comes to our finances, most of us think about things like budgeting, saving, and investing. But financial wellness is about more than just money. It’s about being able to cover your expenses now and in the future, feeling secure about your financial situation, and having the flexibility to make choices that are right for you.
Financial wellness doesn’t happen overnight. It takes time and effort to build a solid financial foundation. But with good financial wellness practices, you are more likely to achieve your goals, provide stability and predictability in your financial life, and increase your overall happiness. In short, financial wellness is covering your monthly expenses without assistance and having some money saved for the future and emergencies. It’s a measure of your overall financial health.
A Real-Life Financial Wellness Example
A little while back, my wife got into a car accident. She was fine, but the car was totalled. It was an old car, so a write-off from our insurance policy.
With our young family, and my wife’s need to commute by car to work, we needed a new vehicle quickly. That feeling alone could have been stressful, but it would have been worse if I didn’t have the money in the bank to buy a vehicle.
Yes, I could have financed something if I had to, but that would have put our family into debt, added another payment to our monthly budget, and added to the car’s total price when you factor in the fees and interest payments.
A fully-funded emergency fund, which is an indication of financial wellness, helped ensure that we were not knocked off track from reaching our long-term financial goals in a time of financial difficulty.
What Is the Definition of Financial Wellness?
The term financial wellness is relatively new, but what does it actually mean? Previously you may have heard people speak of reaching financial independence or financial stability. While both are important, they are just components of financial wellness.
Financial wellness is a state of being where an individual has control over their finances and can meet their financial obligations. It’s not just about having enough money saved up but also includes being able to cover expenses, make wise investments, and stay out of debt.
Financial wellness may seem like an impossible goal, but it’s not. Anyone can achieve it with a bit of work and some planning.
How to Achieve Financial Wellness
It can be easy to get lost in the day-to-day expenses of life and forget about the future. But if you want to achieve financial wellness, it’s crucial to have a plan. Here are a few tips for getting started:
- Make a list of your short and long-term financial goals. This list could include saving for retirement, paying down debt, buying a home or taking a vacation.
- Track your spending for at least a month. This will help you better understand your expenses and see where you can make adjustments.
- Create or update your budget using the information you tracked and insights you learned in the last step.
- Try to make small changes in your spending habits using the information you collected when you tracked your spending. Some examples are packing your lunch instead of eating out or cancelling unused subscriptions.
- Depending on your goals, you may want to try to maximize your earning potential by asking for a raise, increasing the rates you charge, or taking on a side hustle.
- To minimize fees and interest payments, you may want to consider consolidating your debt. Only do this step if you have gotten a handle on your spending.
- Seek out professional help if needed. For example, a financial planner can help you create a roadmap to financial wellness, helping to make sure you have the right financial products to insure yourself and your assets and an investment strategy to help you stay on track with your goals.
- Lastly, if you want to reach a state of financial wellness, it is helpful to seek out books and other resources to increase your financial literacy.
Benefits of Financial Wellness
Financial wellness is the ability to manage one’s money wisely and confidently. It encompasses things such as creating a budget, tracking expenses, and investing for the long term. Financial wellness can help individuals save money, pay off debt, and build a cushion in case of an emergency.
Financial wellness is a term used to describe a way of life that helps people manage their money effectively. It can help people save for the future, live below their means, and pay off debt. It can also help people learn how to deal with money problems in a healthy way. You can teach yourself how to reach financial wellness through education, personal finance counselling, or financial planning services.
There is no one-size-fits-all definition of financial wellness, but if you manage your debt, have an emergency fund, and save for retirement, you are well on your way. It’s also important to understand your financial situation and be proactive about managing your money.
Financial wellness is not only about having a certain amount of money in the bank. It is about having a healthy relationship with money and managing your finances in a way that allows you to live a comfortable life without stress or worry. You can do many things to improve your financial well-being, like following the above steps, and it is never too late to start.