Your physical wellness is how you feel at any given moment. Financial wellness is similar but reflects your concerns about your finances. Having enough money to pay your household expenses and plan for the future is one of the biggest worries for many families. Developing a healthy relationship with money is a positive step toward financial wellness, and it reduces the stress that impacts your physical well-being.
Pursuing financial wellness is about having a healthy economic life—that means sufficient income to pay your bills on time; setting aside emergency savings in the event of a personal disaster; and ensuring that your financial plans to buy a home, take a trip, retire, and other planned spending are on track. Financial wellness is feeling confident about having enough money, even in times of uncertainty.
A growing number of Americans are thinking about their financial wellness. According to Gallup:
- 40% are concerned about paying their monthly bills, up 8% over last year.
- 52% are worried about maintaining their lifestyle, up 7%.
- 35% are worried about paying their rent or mortgage.
- 22% are worried about making minimum credit card payments.
- 63% are worried about having enough to retire.
The way to alleviate money woes is to plan and take positive steps.
The Basics of Financial Wellness
Financial wellness is as much about your attitude as it is about your actual financial situation. Before striving for financial wellness, you must understand your relationship with money, especially your emotional connection.
Money is a tool, not a goal. It’s healthier to focus on ways to make the most of your money rather than accumulating more. If you obsess about money, try cultivating a grateful mindset that reminds you of what you have and that you deserve to be happy and free to accumulate wealth.
Tracking your spending is an essential step. You need to control your money rather than letting your spending control you. You should also save money, establishing a safety net for when times get tough. Most important of all, manage your debt. Accumulating too much debt is one of the most common causes of money worries.
Practical Steps Toward Financial Wellness
Just as you must exercise and maintain a good diet to stay healthy, you must be proactive to maintain financial wellness. Just a few basic steps can improve your financial health—and none of them are nearly as hard as going to the gym.
1. Create a budget.
To take control of your money, you need to create a budget to manage your spending. To stay financially healthy, you need to take in more than you spend. You also need to have enough money available to build savings for the future.
Once you develop a household budget, compare your income and expenses. This helps you determine where all your money is going and whether you need to adjust your spending to meet your financial goals.
2. Build a nest egg.
Having savings is an essential part of maintaining your financial well-being. Set aside enough money for a rainy day and to achieve long-term financial goals. Start by creating an emergency fund. There are different opinions on how much you should save for emergencies, but consider how much you would need as a safety net if you lost your job, couldn’t work, or faced a family emergency.
Most experts recommend saving 3-8 months of living expenses. You should also plan for longer-term goals, such as a college education, a new home, or other big-ticket items. The size of your nest egg should be dictated by how much you need to save to feel secure.
3. Invest for the future.
A retirement plan with regular milestones is a great way to plan for later life. Start with basic savings strategies, then invest in getting the most out of your money. Put your money into stocks, bonds, individual retirement accounts, 401(k) plans, and other retirement vehicles to spread the risk and increase your returns. You should work with an investment professional you trust to guide you.
4. Buy insurance.
The right insurance can reduce financial risk and promote peace of mind. Some insurance, such as homeowners, renters, and auto insurance, is required. To improve your financial wellness, consider other types of protection, such as life and disability insurance. You want to have the right coverage so you and your family can feel secure.
5. Manage your debt.
Nearly everyone carries some form of debt, whether it’s a student loan, a mortgage, or a credit card. As part of financial wellness, you want to first pay down the expensive debt with high interest rates, such as credit cards, so your debt-to-income ratio doesn’t get out of control.
Ideally, you want to balance your debt and your cash flow. Paying down expensive credit card debt frees more money for other bills and savings. Debt with lower interest rates, such as student loans or a mortgage, should fit comfortably in your monthly budget. If you carry too much debt, consider exploring a debt consolidation strategy.
iQ Can Help You on Your Path to Financial Wellness
Financial wellness is a lifelong pursuit. Pay attention to your finances and review your spending habits regularly to see if you are meeting your long-term financial goals and are prepared for emergencies. The future is uncertain, so all you can do is prepare for the unexpected.
When a crisis strikes, whether it’s a personal problem or a community disaster, you want the right financial support. The financial experts at iQ Credit Union have been helping members plan for the future—and the unexpected—for over 70 years. We have investment strategists who can help you plan for retirement, and we have short-term financial solutions that can help in a time of need. Additional services, such as online banking and savings accounts are also available to help you optimize your finances.
iQ Credit Union can help you with your financial wellness strategy. To start, download our Financial Survival Guide to begin crafting your financial wellness strategy. And don’t hesitate to contact your iQ Credit Union representative. We are always happy to help.