Financial wellness is a holistic approach to managing your finances beyond basic budgeting. It involves assessing your current financial situation, understanding what you need to do to reach your financial goals, and making the necessary changes and decisions to achieve them.
Financial wellness also means having the knowledge and resources to make informed financial decisions.
For example, it’s important to understand how credit works, know when and how to invest, and avoid scams or predatory lenders. Financial wellness requires you to actively manage your money to live comfortably now and in the future.
There are four key principles of financial wellness:
- Budgeting: Create and stick to a budget to set the foundation for your financial well-being. Think of it like a roadmap to manage your daily, weekly, monthly, and yearly expenses. As long as you follow the map, you’ll stay on the road toward a financially secure future.
- Debt: In the current retirement crisis, long-term and consumer debt are two of the most significant obstacles preventing people from saving and investing. Debt management boosts your credit score, opening doors to better borrowing rates, home and auto loans, and credit limits.
- Savings and Investments: Short-term savings and investments can provide the money you need for immediate big-ticket expenses, such as home repairs, vacations, and large purchases. Ideally, you don’t take on more debt to cover these expenses. Meanwhile, long-term savings and investments actively fund your retirement plan.
- Protection and Insurance: Anything can happen at any time. An emergency fund and robust insurance plans will prevent an accident or illness from derailing your financial situation.
Financial Wellness at Every Life Stage
There’s no one-size-fits-all financial wellness strategy. Different generations are at unique stages in their life. They have various financial goals and obligations and must mold their wellness strategy accordingly.
How Financial Wellness Helps Close the Retirement Savings Gap
Personal loans can be a valuable tool in managing your finances, but using them wisely is important. Here are some key tips for managing your loan:
- Financial wellness aims to bolster your long-term savings by leveraging short-term solutions. For example, setting a budget and chipping away at debt today will have windfall effects later in life. You’ll be able to save and invest more money, leaving a larger nest egg for retirement.
- Many people are actively juggling several financial goals at once. They’re paying off debt, buying a house, starting a family, and caring for an aging loved one—all while trying to save for the future. Ultimately, financial wellness is about balancing today’s demands with long-term retirement goals.
- Remember the four keys to financial wellness: budgeting, debt, savings, and insurance. Find ways to adjust the sliders in each category to live comfortably while saving for retirement. Don’t hesitate to lean on a trusted financial partner for guidance
