Being financially well means having enough money to cover your immediate expenses, pay off any emergency bills or fees that pop up, and have a steady income that covers your lifestyle. But beyond those more obvious reasons that financial wellness is important, is it impacts your overall happiness.
While we don’t want to only correlate money equaling to happiness, being able to take care of oneself, family, and not stress is impacted by our financial wellbeing. But learning how to maximize your financial wellness now ensures you can handle various financial situations in the future.
1. Reliable income
Being financially well starts with having a reliable income and knowing at a consistent time, you will expect to be paid a certain amount. 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 should obtain some level of comfortability.
2. Debt Payoff plan
If you don’t have debt, then that’s great! You are a step ahead to your financial wellness. But debt is quite normal whether via student loans, credit card, or if you have a mortgage.
But you should know how much debt you have, the interest on this debt, where your payments are going, and establishing a payoff plan. Even by understanding those things about your debt, you are on a path to wellness. For high interest loans like credit cards or student loans, you want to find a way to pay that down as soon as possible.
3. Emergency Fund
Establishing an emergency fund helps you stay prepared for the unexpected or when “life happens.” But now, you won’t stress about the money because you have a nice cash reserve that you can access quickly. You’ll see all sorts of recommendations from 3-4 months to 6-12 months of expenses ready to go. Ultimately, it’s what you feel comfortable with.
4. Creating A budget
Another common personal finance tip is creating an accurate budget for yourself. But beyond creating it, also sticking to your plan. You should know where your money is going each month and how much cash you’re bringing in.
5. Build Some Investing Knowledge
Besides understanding how to pay off debt and save money, you should be able to take it a step further. This means getting down the basics of investing money. By no means do you need to become an investing guru, but understanding the concepts of why you want to invest your money and the options for investments will help your financial wellness grow.
6. Understanding Credit
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.
While the credit system might be a bit odd for calculating scores, it’s important you know how to manage and influence your credit in the positive direction. Financial wellness includes monitoring your credit report and learning how to improve or maintain a good score.
7. Retirement Planning
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.
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.