Now that all the holiday decorations have been taken down, our focus has shifted from reflecting on the past year to focusing on what is to come. The resolutions you make to support your financial health are as important as those you make to take care of your physical wellness.
What is financial wellness?
The first thing to do is define what financial wellness means for you. It is informed by who you are, where you are coming from, and what your experiences with money are. A person who has had serious financial troubles in the past might have different expectations from a person who has enjoyed relative financial stability.
First, ask yourself what you need to feel secure, financially speaking. Here are some questions to think about:
- How much of a cushion of cash savings do I need to feel safe?
- Do I have enough income to cover my expenses?
- Am I in debt, and is paying off my debt a priority?
- Do I have enough cash flow to cover non-essential expenses (like taking my spouse out to dinner) or short-term financial goals (like making a large purchase)?
- Am I on track to meeting my long-term financial goals (like retiring at a certain age)?
How to work toward better financial wellness.
Thinking about financial wellness is often a matter of setting goals for what you can accomplish right away and what you can work on to support your longer-term financial goals. For now, consider taking these actions:
- Have a values-based conversation with the decision-makers in your household, meaning any tax-paying adult who contributes income and shares responsibility for the bills. This could be your spouse or another family member. Make sure that the non-essential things you are spending money on align with your commitments to meet your financial needs. This is not a “stop getting lattes” conversation; it is a “are we spending money on the things that matter?” conversation.
- Consider automating payments, especially towards regular items, including student loans, other installment payments, and even longer-term savings.
- Creating an emergency fund reflecting 3–6 months of household expenses will afford you a stable foundation going forward. If that seems too ambitious, build the fund a month at a time until you reach your goal.
- Make regular contributions to your retirement accounts. Take advantage of any matching contributions you might get from your employer.
- Make long-term financial goals. If you are thinking about buying a house, for instance, let that guide your overall financial strategy.
- Is becoming totally debt-free an achievable goal? It can be if you make it a priority. That said, being totally debt-free may be a difficult task for most households. For that reason, it could be better for you to focus on your other goals first and make debt freedom a target for a later date. For example, you could aim to be debt-free by retirement.
These are, of course, not hard and fast rules. Every individual has their own unique definition of financial wellness. Some of these examples might feel out of reach. Others you might already be practicing. The good news is that with careful practice and judicious scrutiny, many people can gain a feeling of satisfaction and even pleasure from maintaining financial wellness.
Need help developing a strategy to reach your financial goals? Schedule a time to discuss this with your Telarray Advisor today.