Financial wellness (or financial wellbeing) refers to a person’s overall financial health and the absence of money-related stress. It’s the result of successful expense management. Financial wellness is an important part of overall employee wellbeing which consists of physical, mental, and financial wellness.
Financial wellness is an important part of overall employee wellbeing which consists of physical, mental, and financial wellness. But why exactly is financial wellness important? Here are several reasons:
- Absenteeism and Presenteeism
- Happy & healthier employees
- Productivity loss
Tips to achieve financial wellness
1. Reliable income
Making money is definitely the cornerstone of financial wellness and increasing your income can help you obtain your goals. You do not need to be a millionaire, but it’s important to obtain some level of income stability. Being financially well starts with having a reliable income and knowing at a consistent time, you will expect to be paid a certain amount. Steady and reliable income is one of the cornerstones of financial wellness.
Even as your earnings increase, try to live off a set income level and add to your investments. Allowing your interest-earning accounts to grow will help you offset any downturns or emergency expenses. You have a steady and reliable income when you know when your next few months’ of paychecks will arrive and approximately how much money they’ll contain.
Do you know where your money is going each month?
Even if you don’t like budgeting or planning, it’s good to set goals for yourself. You are more likely to stick with it when you have goals to reach and can see progress. By creating a plan, you are visualizing the what, why, and how you will get there. If you don’t already have a household budget, grab your most recent bank statement and look at the total amount of money you have coming into your household each month. Then, factor in fixed, required expenses – things like rent or mortgage payments, utilities, insurance, and more. With the money you have left over, assign a category to each dollar for flexible expenses. For example, if you love to try out new restaurants, you may want to budget $100 a month for eating out. Don’t forget to budget in a monthly contribution to an emergency fund if you don’t already have one.
Write your bill due dates on a calendar. If you have trouble making ends meet at the end of the month, the timing of your income and expenses may be off. It’s often helpful to see the full picture. Write down the due dates for your bills on a printed calendar that you can look at regularly as you plan for the weeks ahead.
Once you’ve made your budget, try your best to stick with it. Pay yourself first and save money as soon as you get your paycheck. If you overspend in one category, don’t be afraid to move money from another to cover your expenses. At the end of the month, you can reevaluate your budget if you had a hard time following it. Your goal is to develop a budget based on your monthly income, expenses, and savings, and then live within your means.
3. Emergency Fund
If you do not have an emergency fund, now is the time to start building it. The goal of an emergency fund is to have available funds for when you are dealing with unemployment or you have an unforeseen cost. You won’t stress about the money because you have a nice cash reserve that you can access quickly. Finance experts often say that you should have at least three to six months’ worth of expenses in your emergency fund. If you have nothing in savings, putting away just $25, $50, or $100 a month is an amazing start. Ultimately, it’s what you feel comfortable with. You can also consider putting it in a high savings investment such as CIT Bank’s Savings builder, which helps put your savings to work with very little risk.
4. Build Your Savings
Once you get a handle on your finances, you can start to map out life events and large purchases, so you can begin saving! Planning ahead is always helpful, and once you get a handle on your current financial plan, set some goals for what comes next. By building a plan, you have a road map to help guide you through the rest of your story.
5. Understanding Credit
Your credit score is another critical part of your financial health. Things like late payments, too much debt or high balances negatively affect your credit score. Keep watch over your credit report and credit score with a free credit report. A higher credit score tells banks and lenders that you’re a reliable and less risky borrower.
The idea of having good credit is key to how well you live. It determines things like your interest rate, mortgage rate, if you’ll get approved for any loans, and even down to being able to apply for credit cards.
6. Reduce Debt
Paying down debt can seem scary or tough, but with some proven strategies, you can make it happen, bit by bit. Our tips for reducing debt can help you find the right methods to trim your debt into something that feels manageable.
Before making a plan to pay down your debts, know what you owe. There are two common strategies to pay down your debt: the highest interest-rate method and the snowball method. In the highest interest-rate method, you pay extra money toward the one debt with the highest interest rate. With the debt snowball method, you pay down the smallest debt first and work your way up, regardless of the interest rate.
7. Retirement Planning
Retirement planning and investing knowledge is important to financial security. Are you saving for retirement and contributing money for your future? The earlier you begin, the more compound interest goes to work for you in your future. Understanding the basics, how 401k’s work or IRA’s, and setting a plan to contribute money towards this will ensure you are financially well into retirement age. If you can’t afford to invest in a 401k you can use an apps that lets you invest in fractional shares and with spare change. It helps you set the foundation for financial wellness and gets you thinking like an investor.
Again, your finances and what may be important to you will vary. But, the above are the basics of financial wellness that essentially everyone will have some focus on at some point. Financial wellness doesn’t happen overnight. You need to take constant, intentional steps toward your financial goals to slowly work your way toward a total picture of wellness. Everyone’s situation is different and only you know which tips will work best for you and will help you reach your financial goals for your specific case.