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What is financial wellness & why is it important?

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You probably have never had anyone ask you directly, “How is your financial wellness doing?” It’s an odd question, but one that would be very helpful if someone did ask you.

A possible reaction you may have to that question would be, “What exactly do you mean by financial wellness?” Let’s address that question in this article, as well as some steps you can take to ensure your financial well-being.

Financial wellness definition

Put simply, financial wellness is your overall financial health. It encompasses all of the areas of your life financially, including:

  • Your personal savings plan
  • Retirement planning
  • Credit and credit scores
  • Tax planning
  • Insurance coverage

Self-evaluation and education are two of the tools you will need to use to help determine your level of financial wellness.

Honestly evaluating your financial situation can be both liberating and painful. It can bruise your ego if you don’t like what you see. Perhaps you feel that you should be further down the road financially than you are for your age. Or maybe you are just getting started creating a financial game plan and are feeling discouraged because of the size of the mountain you have to climb. When it comes to our finances, fear and trepidation are not unusual feelings.

Education plays a significant role in your financial well-being. There are many free resources online to help you better understand the areas are you need to concentrate on, as well as in-person workshops you can attend, which are often sponsored by banks and investment firms. You’ll quite likely have to put up with a sales pitch, but the information presented can be invaluable.

Financial wellness tips

How can you take the initiative and begin taking steps to become financially well? For starters, achieving financial wellness includes a person's ability to evaluate and implement the following seven action items.

1. Create and stick to a monthly budget

Financially secure individuals sit down at the beginning of each month, analyze their income, and plan their expenditures accordingly. Several times during the month, they evaluate where they’re at with their budget and make any necessary adjustments. Budgeting like this not only is smart financial management, but it gives you a sense of control over your finances, which is good for your financial wellness.

2. Build an adequate emergency fund

Sometimes life can throw us curveballs, and unexpected events, such as a surprise car repair bill, can throw our budget off-kilter. That's why you need an emergency savings fund. Having 3-6 months of income in reserve can help make sure that unforeseen expenses don’t kill your budget, or make you resort to using credit cards to handle an emergency.

3. Pay yourself first

Having the discipline to take the first ten percent from every paycheck and deposit it into an account designed for your long-term financial health, such as a retirement savings account, is a smart money move that financially savvy individuals take. It takes self-discipline, but as you watch your accounts grow, you’ll have the satisfaction of knowing you are responsible financially.

4. Start saving for retirement now

No matter how long you have until you retire, whether it be five years or forty-five, it’s not too late to start putting money aside for your retirement years. Of course, it’s best to do this when you’re in your twenties, but sometimes in our early earning years, we don’t have the funds for it. No matter how small the amount you can set aside, start now. You can increase the amount as your income grows.

5. Get the insurance you need

Having enough life insurance to provide for your survivors is also part of sound insurance planning. Along with good health and dental insurance plans, disability insurance is also a must-have. You need to protect your income; it’s the most significant personal asset you have.

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6. Use credit wisely and sparingly

When possible, pay cash for your purchases using a debit card. One of the most deflating feelings you can experience is looking at your credit card statement each month and seeing the interest rate you’re paying on your balance. If you do use credit cards, pay them off at the end of each month to avoid paying interest on your purchases.

7. Consult a competent financial advisor

Very few people can come up with an integrated and comprehensive financial plan on their own. It’s best to use an advisor that charges a flat fee for a financial plan, not one that earns commissions by selling the products that you need.

[ Related: Should you embrace DIY financial planning or hire a pro? ]

Financial wellness programs in the workplace

Just because financial wellness is personal doesn't mean it's purely an individual effort. In fact, the topic has of financial wellness has become so important in recent years that employers are stepping up to offer financial wellness programs in the workplace.

Employers know healthy, happy employees produce better results when they show up to work each day. In turn, this helps foster a more positive, inclusive working environment where teamwork is valued and differences in opinions are accepted.

The good news is that companies do not have to start-from-scratch. By partnering with the top financial wellness programs, employers are able to contribute to the success of their employees outside of the workplace as well.

If you work for a company, you want to take advantage of employee financial wellness programs that are offered by your employer. These programs are intent on helping you plan your financial future, as well as reduce stress centered around your life and your money. Smart employers know that employees that have adverse economic issues are less likely to produce high-quality work.

If you work for yourself, being educated on financial wellness falls on your shoulders. There’s a lot to consider and take in, but if you do it in bite-size pieces, you can become very adept at having your life structured to attain excellent financial health.

[ Read: The 20 Best Employee Benefits in 2020 ]

Bottom line

Financial wellness is obtainable for anyone that is committed to learning and practicing the fundamentals of managing their finances wisely. Get started today and see how the results compound quickly for you. The feeling of well-being you’ll have is invaluable.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published April 28, 2020
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