Last Updated on November 12, 2022 by Rebecca Lake
Financial wellness is a measure of a person’s overall financial health. It takes a holistic approach to increasing awareness about your personal finances and improving your money situation.
The concept of becoming financially well is centered around financial education.
People who pursue wellness with their money are continually learning as part of their financial journey. Which is a good thing when it comes to managing day to day finances and creating financial stability.
January is Financial Wellness Month, a time that’s dedicated to helping people expand their money awareness and financial wellbeing. But taking steps to improve your money situation and achieve financial security is something you can work on all year long.
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What Does It Mean to Have Financial Wellness?
Having financial wellness means that you have a good relationship with money and that you understand the financial basics. You’ve got a firm grasp on the building blocks of what it means to create financial security and you’re taking steps to achieve it.
Financial wellness includes activities like:
- Learning the basics of budgeting
- Saving money for unexpected expenses
- Tracking spending
- Consistently setting financial goals
- Learning credit and debt management
- Adding money to retirement savings
Working toward financial wellness is key to achieving financial freedom. And good money management can result in an absence of money-related stress.
What Is the Goal of Financial Wellness?
The overall goal of financial wellness is to increase your financial health and well-being.
Approximately 60% of U.S. adults say they struggle with financial anxiety. Some of the biggest drivers of high financial stress include:
- High levels of debt (or the possibility of incurring debt in the case of college students)
- Stagnating or low wages
- Worries over how to pay bills or avoid late payments
- Struggles with budgeting
- Lack of health insurance
- Not having enough money in emergency savings accounts or retirement accounts
Even a seemingly small financial crisis can be enough to throw you off course. More than half of Americans couldn’t cover three months’ worth of expenses if they got laid off from work or became sick.
In some cases, financial stress results in impacts to your mental, emotional and physical health.
For example, the majority of employees–nearly 65%–say they’ve experienced higher levels of financial stress because of the pandemic. Employees’ financial wellness is important because it can productivity and job performance.
If you’re stressed about money, you could make more mistakes at work. Those mistakes could put your job in jeopardy, which could trigger even more financial stress.
More than half of employers have financial wellness programs to head off these kinds of problems. So it may be worth looking into whether you have financial wellness benefits at work.
Related post: 7 Positive Ways to Manage Financial Stress In Hard Times
How Do You Create Financial Wellness?
Improving financial well-being is a marathon, not a sprint. And if you’re deep in debt or struggling financially, it may seem impossible.
There’s good news, though. There are things you can do to take financial matters into your own hands and improve your money situation.
These tips can help you create financial wellness for the long term.
1. Master the basics of budgeting
Creating a budget is the first step in geting control of your money.
Your budget breaks down:
- What you’ll spend on essentials (i.e. housing, food, utilities, etc.)
- What you’ll spend on nonessentials (i.e. clothing, recreation, etc.)
- Amounts you pay toward debt, if any
- Amounts you save, if any
There are different budgeting methods you can use, including:
As you focus on financial wellness, go over your budget line by line to see where you might be overspending and where you could find extra money to save.
Using a paper budget planner is a great option if you like to get hands-on. Or you could use a budgeting app like Personal Capital to track spending for you.
Related post: 12 Best Budgeting Planners to Take Control of Your Money
2. Set clear financial goals
Setting different goals for your money is a powerful way to improve financial health and wellbeing.
These tips can make it easier to set personal financial goals you can actually reach:
- Stick with just three goals so you don’t feel overwhelmed by what you’re trying to achieve
- Make your goals S.M.A.R.T.–Specific, Measurable, Achievable, Relevant and Time-Bound
- Break your big goals down into smaller mini-goals
- Create action steps for each mini-goal
- Break those action steps down by quarter
Now what kind of financial goals should you be setting?
Think about what would help you feel like you’re living a richer life.
For example, that could be:
- Saving $10,000 in an emergency fund
- Paying off all of your credit cards or student loan debt
- Starting a profitable home business so you can quit your day job
Your financial goals can be big or small, depending on where you are money-wise.
So grab a notebook or bullet journal and start brainstorming. Thing about the goals that could help you build a strong financial foundation, then outline the steps you need to start taking to get there.
3. Get debt under control
Debt is a common source of stress for many people. The average American household has over $92,000 in consumer debt.
That includes credit cards, student loans, personal loans and mortgages. If you want to achieve financial wellbeing, debt management needs to be part of your plan.
There are different approaches you can take to paying down debt and I know it can be hard if you have a low income. One popular option is the debt snowball method outlined in “The Total Money Makeover”.
This method involves:
- Listing your debts from lowest balance to highest
- Paying as much money as you can toward the debt with the lowest balance until
- Paying the minimums due on all other debts
- Rolling over your payment from the first debt on the list to the next one once it’s paid off
The debt snowball doesn’t necessarily save you money on interest. But it can help you keep your motivation going when you’re struggling to pay down debt.
If you’re trying to pay down student loans, consider student loan assistance programs. For instance, you might qualify for student loan forgiveness or an income-driven repayment plan.
And if you want to pay off credit card debt fast and save money on interest, I recommend checking out the Tally app.
Tally helps you pay off your credit cards in less time while helping you save money on your interest rate.
Pro tip: Consider credit counseling
If you’re truly struggling to get a handle on debt, it may be worthwhile to look into credit counseling. A credit counselor can review your budget and help you come up with a workable plan for managing debt.
4. Make saving automatic
Saving money is critical for improving financial wellbeing but it doesn’t come easy for everyone.
You might struggle to save if you’re living on a tight budget. Or you may never have learned the saving habit as a child so it’s hard to adopt it as an adult.
Automating your savings is a simple way to secure your financial future. Micro-savings apps can make this easier.
(And if you have an account at a Bank of America, the Keep the Change program lets you save your spare change.)
Pro tip: Try a money-saving challenge
Money saving challenges can help you bank extra cash in a relatively short period of time.
For example, you could do a no-spend week or month where you don’t spend any money at all on non-essentials.
Or you could take the 52-week money challenge, which involves saving small amounts of money each week.
5. Invest regularly
Saving money means setting it aside for the short term. Investing money means putting it into the stock market or other securities in order to grow wealth.
Investing comes with more risk than saving but it can also yield more rewards if your investments do well. And it’s important for retirement planning and creating financial security.
Getting started with investing is not as complicated as you might think and you don’t need a large amount of money to do it. Two of my favorite tools for making investing easier as a beginner are Acorns and M1 Finance.
Acorns is a financial app that lets you invest your spare change.
You link your debit card to the app, then make purchases like normal. Acorn rounds those purchases up and invests them in low-cost exchange-traded funds.
It’s an easy way to build an investment portfolio on autopilot.
With M1 Finance, you can set up automated investments to buy stocks, ETFs and other securities.
The best thing about M1 Finance is that there are zero fees. That means you get to keep more of what your investments earn.
Pro tip: Consider financial advisory services
Financial coaches and financial advisors help people take control of their finances. For example, they can help you figure out things like:
- Debt management and repayment
- Saving for college (if you have kids)
- Managing healthcare costs or long-term care in retirement
If you think you might need professional advice about retirement planning or anything else money-related, you may consider financial coaching or financial planning services.
6. Improve your credit score
Credit scores are one measure of a person’s overall financial health.
A good credit score can make it easier to borrow money when you need to. And you’re more likely to qualify for the best interest rate when you borrow.
Poor credit, on the other hand, can make qualifying for loans or credit cards tougher. And you may get stuck paying higher rates.
An easy way to keep tabs on your credit score and credit reports is to use a free credit monitoring service.
For example, you can use Credit Karma to monitor your credit report and receive alerts any time there’s a change to your credit history.
In terms of how to improve your credit scores, here are some of the most important things to remember:
- Pay your bills early or on time each month
- Keep balances on credit cards low and don’t max them out
- Keep older credit accounts open
- Use different types of credit (i.e. loans, credit cards) if possible
- Hold off on applying for new credit unless you absolutely need to
Credit Karma has lots of great tips on how to build and improve credit.
So consider creating a free Credit Karma account if you’re ready to start working on your score!
7. Increase your income
If you want to become financially well, then finding ways to make more money is an important part of the puzzle.
When your income increases, you have more money to:
- Put toward debt repayment
- Save for emergencies
- Fund your short-term goals
- Save for college or retirement
- Pay bills with less financial stress
You could make more money by asking for a raise at work or getting a part-time job. But you could also grow your income using the money-making skills you already have.
For example, if you’re good at writing or reading, you could:
- Become a freelance writer
- Start a money-making blog
- Get paid to proofread (Sign up for a FREE webinar to learn how!)
- Make money with online transcription jobs (This FREE mini-course covers the basics!)
- Become a scopist
Or if you’ve got awesome organizational skills, you could:
- Start a virtual assistant business (I highly recommend Fully Booked VA if you’re looking for an in-depth how-to course!)
- Make money as an online bookkeeper
- Declutter your home to make extra cash
And if you like kids, you might try:
- Teaching classes online at Outschool
- Becoming a virtual kids’ yoga teacher
- Making money teaching English with VIPKID
These are just some of the possibilities for making more money.
For more ideas, be sure to check out these posts:
Final thoughts on improving your financial wellbeing
Financial Wellness Month is a great time to think about what is (or isn’t) working for you when it comes to your money. But you don’t have to wait until January to think about ways you can improve your financial health.
If you haven’t done a financial review lately, now might be the best time to start. From there, you can crete an actionable plan for making smarter financial decisions.
Before you go, be sure to check out my favorite tools for making and saving money!
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