7 Steps to Financial Wellness

Being ‘financially well’ can keep your stress levels down throughout the year and help you look confidently to your future. If you want to improve your financial wellness, there are a few key areas of focus that can greatly benefit you.

Realize Your Income

• When it comes to financial wellness, a steady income is always the first place you should focus. Make sure you have a full understanding of your current and projected income for the coming year. Having a stable income and understanding what that equates to each month is the best place to start. From here, you can focus more on your financial future and plan by putting together a budget.

Plan Out a Monthly Budget

• Putting together a monthly budget can help ensure you live within your means and set yourself up for financial wellness. Start by understanding where your money is going - spend the time and figure out what your monthly bills are. Make sure you factor in all your expenses such as rent or mortgage, utilities, etc. Don’t forget to account for commonly overlooked expenses such as subscriptions to streaming services. Once you have that number, compare it to your monthly income to determine what’s left over. Then, figure out how you would like to dedicate that money, whether it’s to an entertainment budget for going out, or putting some aside for your savings.

Establish An Emergency Fund

• Now that you have a budget for the year, you should consider establishing an emergency fund for yourself. In a pinch, you can fall back on the money should an emergency arise. If you’re experiencing a home emergency, medical complications, or working through job loss, having funds for these unexpected occurrences is crucial. Consider setting aside a few months of your income to account for a potential emergency. Also, this should be put aside separately from your long-term savings.

Build Up Your Savings

• Now that you have a set budget and money put aside for your emergency fund, you can look to the future. Any amount that you can put into your savings can make a difference over time, so consider what you would like to contribute on a consistent basis. Having this amount withdrawn directly from your paycheck can also prevent the temptation to keep it and spend it on other things. This money should be set aside for any large financial investments you may want to make in the future, or potentially go towards your retirement, which we will cover later.

Check On Your Credit Score

• Whether or not you’ve been able to keep up on payments, it’s always a good idea to check on your credit score. There are many tools available online to get free access to your credit score, such as AnnualCreditReport.com. Once you know your score, you can work on improving it or maintaining your good score. Paying your bills on time, keeping your credit card balances low, and only using what you need are all good ways to keep your score in good standing. For more detailed information on building a better credit score, you can read our previous blog here.

Pay Off Your Debt

• If you have debt to pay off, that should also be built into your budget and financial plan for the next year. Although paying off debt can be intimidating, chipping away at it always helps, no matter how much you are able to pay off. Depending on your financial situation there are a few best ways to approach debt. Paying off your higher interest rate debt first will save you money in the long-run and make it easier on your budget. However, it may make more sense to pay off debts with lower balances. Getting these off your plate can free up that money to assist elsewhere. Overall, you should always consider factors such as interest rates, length of the debt, what is within your budget, and how it will impact your credit score.

Retirement

• It’s never too early to think about retirement. Saving earlier also means you can make retirement a reality sooner. Additionally, getting an early start allows you to put compound interest to work and get the most out of your savings in the long run. Putting aside money to a retirement account is a big investment in your long-term financial wellness. You should also take advantage of any savings programs your employer may offer. If you have access to a 401k with company match, contribute the amount required to maximize your employer contribution if possible.

Everyone’s path to financial wellness will vary given their current situation. However, keeping these steps in mind and planning for your financial future can have an impact no matter where you stand. Whether taking small or large steps, they all put you on the path towards financial wellness.