How many of us ask, “What is financial wellness?” Perhaps you hear the term but really have no idea of what it really means. The reality of financial wellness is so much more over and above having money in the bank.
It’s about finding a balance between living for today and planning for tomorrow. In this post, we are going to talk about what financial wellness is, why it’s so important, and how you can achieve it. Ready to dive in? Let’s get started!
Table of Contents
What is Financial Wellness?
Financial wellness is a state of being in control of day-to-day finances, ready for emergencies, and confidently working toward long-term financial goals.
Think of this as a form of puzzle where all these pieces are integral to the bigger picture, which is that of being financially well.
Key Components of Financial Wellness
- Budgeting: Tracking where money goes month-to-month.Use our Home Loan Calculator to estimate your mortgage payments and understand your budget better.
- Saving: Storing money for both short-term and long-term goals.Use our RD Calculator to calculate the future value of your recurring deposits.
- Debt Management: Operating debt at manageable levels while borrowing responsibly.
- Investment: A means of growing one’s wealth in due time in available financial channels.
- Emergency Fund: Having money available to pay for unexpected expenses.
- Future Planning: Getting ready for retirement and/or other future needs.
Why Financial Wellness Matters
You may still be wondering, “Why should I care about financial wellness?” Well, imagine waking up every day with no concerns about how to pay bills, or whether one will have enough to live comfortably in retirement.
That sounds nice does it not? Financial wellness really is not about money per se, but about peace of mind and the freedom to live life one intends to live.
Impact on Your Life
- Mental Health: Financial stressors may be the cause of mental health disorders such as anxiety, depression, and other disorders. Attainment of financial wellness can reduce most of these stressors.
- Relationships: Money is in the top few reasons relationships fight. Feeling financially well will build better communication and harmony with those around you.
- Opportunities: If one is financially sound, then there is freedom to pursue opportunities that otherwise may not be accessible. Whether this is traveling, starting a business, or going back to school.
Steps to Achieving Financial Wellness
Now that we have looked at why financial wellness is so important, how is it achieved? Again, this does not fall from the sky overnight. This calls for patience and one or two more disciplines, but generally speaking, it pays big time.
1. Draw Up a Budget
The first step toward financial wellness is to make a budget. A budget will let you monitor income and expenses to ensure that you really know exactly how you’re spending your money every month. First, add up all your sources of income.
Next, write down all your expenses—everything from rent and groceries to entertainment and savings.
Once you have a better picture of where your spending is going, you can spot areas where you might be overspending and make adjustments.
2. Build an Emergency Fund
Life is full of surprises, and not all those surprises are nice ones. An emergency fund serves as that cushion against all these surprise expenses, such as medical bills or car repairs.
You should save three to six months’ worth of living expenses in some kind of separate account—easily accessible—so it will be there when you need it.
3. Manage Your Debt
Debt is the barrier to your financial health. Some debt is considered “good” debt, like a mortgage or student loans. Other types, like credit card high-interest debt, though, may balloon out of control. Pay off high-interest debt first.
You could consolidate or refinance your debt into lower interest rates. Never take new debt unless absolutely needed.
4. Save and Invest for the Future
It’s never too early to begin saving for the future—be it retirement, education of children, or major purchases. The sooner you begin to save, the better. Avail as much facility as possible from employer-sponsored retirement plans, such as 401(k), that offer matching contributions.
If needed, set up an IRA or other investment accounts to grow your savings over time. Diversify your investments to minimize the risk of loss.
5. Review and Adjust Your Plan
Your financial situation will change over time; hence, it is at this point very important that you make it a habit to review and adjust your financial plan.
Every now and then, take out time and review your budget, savings, and investments.
Course-correct as necessary to be on target towards meeting your goals. Not confident in the decisions you are making about your money? Need not hesitate seek out professional guidance.
The Path to Financial Wellness
It is important to remember that financial wellness is a process, not a state. It requires constant attention and work, yet it is well worth it. Just imagine being able to live life focused on what is most important—your family, passions, and dreams—without having money be an ongoing concern.
Small Steps, Big Changes
And remember, you do not have to make giant steps at a time. Small steps will bring you closer to the financial health you want to reach: making a budget, opening a savings account, or even paying off a small debt.
Acknowledge and Celebrate Your Successes
Take the next steps to enjoy your successes along the way. Each success, big or small, brings you closer to an orderly and satisfying life.
Conclusion
Take ownership of your financial future. It is finite that financial wellness can be achieved; it’s all about making smart choices today that set you up for success tomorrow. Take control over your finances, and let stress go away; let relationships improve and open yourself to loads of opportunities.
So, what are you waiting for? Begin your financial wellness journey today. You’ll be carefree, knowing you are in control of your future.
Ready for step one? Take out your notebook, jot down income vs. expenses, and find places where you have some wiggle room to make changes. Your financial wellness journey starts here!
