Achieving Financial Wellness: A How-To Guide
Lessons in financial wellness can be learned at any age.
Open Instagram or TikTok and you’re sure to find plenty of advice about how you can manifest your financial dreams. At their core, these tips and tricks are all about goal setting.
But then what? Once you’ve envisioned your best financial life, how do you achieve it? Let’s explore some ways to achieve financial wellness.
Financial wellness means making the most of your money to help achieve your dreams.
It looks different for everyone. There’s no “one size fits all”.
Planning ahead and preparing for emergencies could help keep your finances healthy and give you peace of mind.
What Is Financial Wellness, Exactly?
Let’s start with the technical definition. The Consumer Financial Protection Bureau defines financial wellness as having financial security and financial freedom of choice, both in the present and in the future.¹ We call that mastering your money so you can live your richest life.
Essentially, financial wellness means you feel confident that you can meet your day-to-day financial obligations — bills, loans, groceries, etc. — as well as bigger, broader goals like paying off student loans or buying a home. Plus, you can shoulder an unexpected vet bill or book that trip to Hawaii.
When you’re confident about how you manage your money, you should feel accomplished and less stressed, allowing you to focus on the things that matter most to you, perhaps spending time with friends and family or traveling the world.
This leads to our next point: people with the same income, same financial experiences, and same level of education can take a different approach to their financial wellness definition. It all depends on how they live their life or prioritize their goals.
For example, let’s say you want to reduce credit card debt. One person might define reducing debt as fully paying off their card balances, while another might define it as getting their credit card utilization rate under 30%, a percentage recommended by many credit experts. (Remember, your credit card utilization rate is the amount of credit you’re currently using divided by the total credit you have access to.)
6 Steps for Achieving Financial Wellness
While financial wellness isn’t cut and dry, there are some steps you can take to help set yourself up for success. Let’s break them down.
Step 1: Get to the Starting Line
To create a financial wellness plan that works for your goals, it helps to start with a clear picture of your current financial situation. Understand how much and where you spend each month, so you’re equipped to make the smartest choices for you. Be honest with yourself by asking a few questions:
Are you spending more or less than you earn?
Are you paying your bills on time?
Can you cover unexpected expenses?
What goals are you trying to achieve in the next 6 months? Year? 10 years?
Jenius Bank’s President John Rosenfeld is passionate about financial wellness and helping people understand how their spending their money.
“I’ve always professed that the first step to financial wellness is tracking your spending and figuring out where your money is going. I think it’s unrealistic to tell folks to set a budget and determine allocations for how they want to spend their money, when a significant share of people really may not know how much they spend on various things today.”
After figuring out where you’re starting from, use this information to inform your goals. Check for anything that could be missing or needs improvement. Maybe you want to make sure you can take a vacation every year. Or, you want to lower your credit card debt so you could have more free cash each month.
Even though the future’s uncertain, it’s important to think through where you’d like to be in the days, weeks, and years to come. Remember: you miss 100% of the shots you don’t take. So, take the time to create a plan that supports achieving your unique goals.
Step 2: It’s Budget Time
A budget is a lot like a diet — we know it’s good for us, but it feels like a chore. What if we told you creating a budget doesn’t have to be something you dread… that it can even be fun? Hear us out. At the end of the day, budgets are simply tools to help you track your money and meet your goals. Budgets don’t judge you for your affinity for rare wines or your penchant for custom sneakers. In fact, it’s quite the opposite — they give you the space to be more intentional and prioritize the things you enjoy most in your life.
Based on your general idea of where you’d like your finances to be, you can begin to approximate how much to spend and save to achieve your goals. If you have a big trip you’ve been dreaming about, setting aside just a little bit extra each month or monitoring your take-out spending, for example, could help you get there faster or spring for the first-class upgrade.
When creating your budget, take the time to figure out benchmarks for certain categories, like groceries and transportation. While these numbers vary household to household, taking a few minutes to consider average spending will help you create a realistic budget. It's also important to review your spending at the end of each month to look for patterns or major changes.
For example, did your eating out spending increase this month? Was that an anomaly or did the kids start soccer so there were a few more nights grabbing dinner out after practice? If it’s the latter, look for a category where you can trim out a few bucks next month to account for this change and keep your spending in line with your budget.
Step 3: Emergency Fund to the Rescue
Expect the unexpected. This might sound obvious but preparing for uncertainty may save you in the long run.
A study from The Consumer Financial Protection Bureau found that people without emergency savings are more likely to turn to other expensive methods to make ends meet, like over drafting, rolling over credit card balances, and withdrawing money from retirement accounts.²
An emergency fund is money set aside for large, unexpected expenses. These can be anything from an unplanned car repair to loss of income due to employment changes.
Unexpected medical expenses can also be a huge setback. Nearly a quarter of people with healthcare debt owe between $1,000 and $2,500.³ Additionally, the Federal Reserve found that 24% of adults went without some form of medical care because they couldn’t pay.⁴
Consider opening a dedicated account for your emergency fund and setting a goal amount to keep there. Make sure the funds are still easily accessible so you can access them in case of an emergency but keep them separate from your everyday accounts. This physical separation of funds could make it less tempting to use the money for an impulse purchase, like that 72” TV that’s on sale.
To build your fund, you can use automatic recurring transfers and put a specific amount of cash aside each day, week, or pay period. A general rule of thumb is to have three to six months of expenses on hand, but even setting aside a small amount on a regular basis will add up over time.
Step 4: Cover Your Assets
A study from The Commonwealth Fund found that 43% of working-age adults were inadequately insured when it came to healthcare in 2022.⁵ Similar rates of underinsurance have been found when it comes to other types of insurance, such as home and life.⁶˒⁷
There are many reasons why this might be, but the bottom line is that insurance is a key component to maintaining long-term financial wellness. Although you don’t want to always assume the worst, insurance is the safety net you need in case of emergencies. Knowing you and your assets are protected may ease your mind, so you’re not constantly worried about shouldering an unexpected burden.
That means insuring your home, automobile, life, etc. Disability insurance may also provide a financial buffer in the case of illness or injury. Though it may feel at times like a high-cost investment, avoiding insurance coverage could cost you more in the long run.
When looking for insurance, your first priority is adequate coverage. Then, you can work to find options that work for your budget. Often, insurance carriers will offer a variety of discounts. This could be for paying in full, staying accident-free, or bundling.
Talk to an independent insurance agent about your options. Independent agents can explain what’s included in each plan and help determine what’s the best fit for you and your life.
Step 5: Be Smart About Debt
Debt can be a helpful financial tool. Paying cash for your dream house would be a challenge without a mortgage, for example. Also, sometimes you can borrow money at a better rate than you earn in investments. In that case, you’re using debt to your advantage.
But high-interest debt, like with credit cards, can divert money away from saving and building your net worth. Think about the debt that you may have. Is it helping you build your wealth? What are the interest rates? Look to eliminate debt that isn’t serving your finances in a positive way.
Now, let’s take a look at three common methods for paying off debt.
What It Is
How It Works
Pay off the smallest debt as quickly as possible.
Seeing progress sooner keeps you motivated.
Debt Avalanche Method
Pay the largest or highest interest rate debt as fast as possible.
Paying off a big debt is a boost.
Debt Consolidation Method
Combine debts into a single account.
Possible lower interest rate and one payment monthly.
Step 6: Plan for a Bright Future
Financial wellness isn’t just about the present, it’s also about setting yourself up for success at all stages of your life. The best way to do this is to create a plan for the future. Start investing or planning for retirement early, so you may feel confident knowing you’re on track toward a more secure financial future.
Some of the most common types of investment accounts include:
Before investing, make sure to research all your options and consult with an expert to make a plan that supports your goals and takes your risk tolerance into account.
Don’t worry, you don’t have to be a financial expert to achieve financial wellness. Start small. Break it down into pieces that feel manageable. Maybe take 15 minutes to start making a list of any major milestones you’re working toward. If you have a partner, you can have these conversations with them to dream about your future.
Once you have a general sense of what you’re working toward, carve out more time to think through your budget. Sitting down to crunch numbers in and of itself isn’t very exciting for most of us, but it starts to get fun when you get to see your savings come to life (maybe you’re one step closer to that designer bag splurge, or you find more peace of mind knowing you’re already saving for life after retirement).
It’s also a confidence boost knowing that you can use those savings to make a purchase without disrupting other goals. Before you know it, the hardest part is done, it may be easier making smart financial decisions, and you could continue enjoying the best parts of your life with less worry over your financial future.
Bottom line: taking action today creates an opportunity to live the life you want tomorrow. That’s Jenius.