Financial Wellness and Financial Health Go Together?

What Is Financial Wellness - and Why Does It Matter?

When a new year starts, many people focus on self-improvement — especially improving health and finances. The good news is that, by working on financial wellbeing, you may be able to improve your physical and mental health, too.

Worrying about finances is a leading cause of stress and can contribute to depression, anxiety, fatigue and even lower productivity at work.1?On the flip side, feeling confident and secure in your financial situation may help improve quality of life by relieving stress and giving you freedom to focus on what matters most to you.

What does financial wellness mean?

The specifics of financial wellness may mean something different to every person. In general, though, it’s about effectively managing your daily financial life. And it’s a building block to planning and achieving financial goals.

A person who achieves financial wellbeing is comfortable with where they stand financially today and where they’re heading. They feel some peace of mind by having a financial plan in place and understanding how to track progress toward their goals over time.

How do you achieve financial wellness?

The steps below may help many people move forward on their financial wellness journey.

1. Know your current financial situation.?It’s often useful to start by getting a complete picture of your current assets and liabilities, including your income and routine expenses (such as mortgage and utility bills). To round out the view of your finances, you might also consider your discretionary spending and saving habits. This information may be used to create a budget, which can help disclose whether you’re living within your means. You may find that you should cut back on some expenses, or you may find that you have more disposable income than you thought.
2. Set goals.?Once you know where you stand today financially and have a basic budget, you can work toward setting realistic goals for the future. These will vary for everyone. For example, people may want to purchase a second home, build up cash reserves, pay down debt, finance a college education and so on.

For many people, retirement is a primary goal. In planning for a comfortable retirement, it can help to consider which expenses may start in retirement (such as additional travel or healthcare costs), which may stop (perhaps a mortgage will be paid off) and which may continue (such as utilities and groceries).

Once you have goals, it’s useful to estimate the cost of each one and a timeline for achieving them. Then you can use your budget to help decide how much to set aside every month to reach each target. Having this plan in place can give you peace of mind over your financial future.

1. Identify roadblocks.?To enhance financial wellbeing, it may help to understand the personal obstacles you’re facing. For instance, some people may be impulsive spenders, have negative associations with budgeting or simply lack personal finance knowledge. Financial?blogs?and a trusted?financial team?can be helpful in overcoming those roadblocks and learning more about financial management and other personal finance topics.
2. Mitigate risk.?Another aspect of financial wellbeing can be protecting against the risk of financial loss. This may include an emergency fund, or life, long-term or disability insurance. These tools may help secure your finances against unforeseen events, such as job loss, serious injury or long-term health issues. Some people may set aside a group of assets in their investment portfolio that could be liquidated to help cover unplanned costs. And, in general, regularly assessing a portfolio’s allocations may present opportunities to buffer against investment risks.?
3. Review and revise.?Financial wellness is a journey, not a destination. Regularly reviewing your overall financial situation and goals can help you stay on-track, adjust for life changes and maintain a sense of financial wellbeing.