What is Financial Wellness?
Financial wellness means taking charge of your finances and creating a solid foundation that allows you to live a life without financial anxiety. It permits you to have peace of mind knowing that you have financial coverage to withstand any unexpected expenses that may hit your bank account, while enabling you to have a healthy relationship with your money.
In other words, financial wellness means you have your ducks in a row.
But it is crucial to remember that financial wellness is not a one-time fix. Instead, it is an ongoing effort that requires you to continue making more than you’re spending, investing for your future, building your emergency fund, and squashing any debts that pop up before interest accrues.
Creating this harmonious relationship with money allows you to live a stress-free life without consistently worrying about your finances.
No matter how deep in a hole you might be, it’s never too late to start somewhere. Here are 3 key steps to kickstart your financial wellness journey today.
1. Conduct a Holistic Audit
Taking stock of your current financial situation allows you to get a clear sense of how far you are from your financial goals and what steps you will need to take to get to where you want to be. This audit process generally includes a review of the following:
- Total Your Debts (e.g., personal loans, student loans, credit card balances, etc.)
- Calculate Your Monthly (Fixed) Expenses (e.g., rent or mortgage, car payment, health insurance, utilities, etc.)
- Measure Your Total Income
- Check Your Credit Score
- Know Your Net Worth
Once you completed your audit and have a clear picture of your current financial standing, identify any blockers that are currently interfering in your quest for financial wellness and are damaging your financial health. For instance, if you discover that you have a negative net worth or an imbalanced debt-to-income ratio, write down these hinderances as part of this first step.
2. Reflect Prudently
Reflecting on how you arrived at your current financial state is an essential step in your financial wellness journey. Imagine that you’re an onlooker taking a step back to assess your own situation. This bird’s eye view allows you to understand the money mistakes that led you to where you are today, allowing you to avoid them at all costs in the future.
Examining the choices and circumstances that led to your current financial situation also provides unbeatable insights that will guide you on your path to financial wellness. For instance, if you are currently struggling with a stream of debt payments because you took on too many loans simultaneously, you can learn from this and be cautious about applying for debt in the future.
The reflection stage is also a great chance to highlight negative patterns that may have flown under the radar while performing your audit. As an example, you may realize that your tendency to order delivery via DoorDash too often contributes to your paycheck-to-paycheck lifestyle. By acknowledging these patterns and working to change them, you can regain control of your financial situation.
3. Take Action
After wrapping up your audit and reflecting on your current financial state, you can start taking action to implement positive change and improve your financial wellness. Wipe your slate clean. Forget your past mistakes and avoid harboring guilt or shame. It’s time to start anew.
Don’t forget that the journey toward financial wellness is not a straight path, as there are many twists and turns along the way, and curveballs are an inevitable courtesy of life.
For instance, if you have a high level of debt and are spending a significant amount of your income on monthly payments, your top priority might be finding creative ways to crush debt. On the other hand, if you have a low credit score and are having difficulty obtaining necessary loans, you may need to first focus on rebuilding your credit.
In either case, regardless of your specific situation, the core goals of financial wellness remain the same: to establish a rock solid foundation for your financial future and maintain a healthy relationship with money.
Start today so that your future self will thank you.
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