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A Guide to Financial Wellness

A Guide to Financial Wellness

Jenius Bank Team3/25/2024 • Updated 4/4/2024
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Financial wellness impacts all areas of life.

We know that certain financial habits set us up for success while others make money management harder. But there’s more to financial wellness than staying on top of routine costs and building savings.

Financial wellness refers to establishing positive behaviors that may help you maintain stability and make choices that fit your life and goals. Let’s take a closer look at what financial wellness is and ways to practice it.

Key Takeaways

  • Financial wellness refers to the ability to cover expenses and support your chosen lifestyle now and in the future without straining your budget.

  • To help achieve financial wellness, you need to manage short and long-term finances, set goals, build your savings, and prepare for the future.

  • Financial wellness isn’t something you do once, it’s a series of habits that could help you succeed over time.

What Is Financial Wellness?

Financial wellness, sometimes called financial health, refers to your ability to meet current needs, manage your money, and prepare for long-term financial security.1 Four elements make up financial wellness.2

  1. Managing short-term finances: Your short-term finances include day-to-day expenses, like utilities or groceries, as well as short-term goals, such as taking a vacation or buying a new computer.

  2. Managing long-term finances: Long-term finances refer to goals that extend over several years, such as paying off a mortgage or building retirement savings.

  3. Improving current financial freedom: Financial freedom refers to the ability to cover your expenses without having to rely on credit cards, loans, or other forms of debt.

  4. Achieving future financial freedom: Future financial freedom refers to your ability to maintain your chosen lifestyle without taking on debt or prematurely draining your savings account. It should cover plans like growing your family, buying a home, and retiring from the workforce.

Five Principles of Financial Wellness

People who achieve financial wellness often implement these principles as they go.3

  • Budgeting: Building a budget and sticking to it may help you make intentional choices with your money.

  • Managing debt: Debt may be a useful tool on your financial wellness journey, as long as you make on-time payments, use it strategically, and avoid taking on more than you’re able to repay.

  • Saving: Building your savings may help you achieve certain goals such as creating an emergency fund or saving for a down payment on a home.

  • Investing: Investments, such as retirement accounts and other investment portfolios, may help build additional wealth. Consult with a financial advisor or investment specialist to determine the best options for your situation.

  • Managing risk: Financial risk refers to things like investment performance, changes in income, inflation, and more. Understand how different types of risk may influence your finances, and adjust your financial strategies when necessary to protect your wealth.

Financial Wellness vs Financial Literacy

Though financial wellness and financial literacy are closely related, they’re different concepts. Financial wellness is a state of being where you’re able to meet current obligations and are on track to a secure future. Financial literacy refers to the knowledge you need to manage your money.4

Without financial literacy, you may not be able to achieve financial wellness. Increasing your knowledge of how the financial system works and how the economy could affect your finances may help you effectively plan for the future.

How to Practice Financial Wellness

Achieving and maintaining financial wellness is an ongoing journey. While everyone’s process is different, there are a few practices you could follow to help keep your finances on track.5

Create a Solid Foundation and Maintain It

Financial wellness often begins with a firm budget. But that budget may change over time as your income and finances evolve. Get in the habit of tracking your money (both spending and saving) and craft a budget that fits your situation.

Once your budget is in place, focus on building your savings. Start with an emergency fund, ideally saving between three and six months’ worth of living expenses to get you through tough times. Other saving goals you may tackle could include creating a vacation fund or saving for the down payment on a new home.

Begin saving for retirement by contributing to a 401(k) or IRA. If your employer offers a match on your 401(k), try to contribute enough to qualify for the full match to help your nest egg grow faster.

Determine What’s Important to You

As part of your financial wellness journey, pinpoint what matters to you. Identify your values and priorities to help guide your money decisions.

Use these values to help establish and prioritize your financial goals. Break your goals into manageable steps and incorporate them into your budget, savings plan and investment strategies. When you understand how your priorities connect to your overarching goals it may help you be more intentional with daily financial decisions.

Develop a Healthy Relationship with Your Finances

Though achieving financial wellness involves being mindful about your money, obsessing over money doesn’t feel great. Try to create balance between wants and needs and leave room for the occasional splurge purchase.

Don’t hesitate to consult with an experienced financial advisor as you go. They may be able to provide advice to help you stay on track and keep a healthy perspective on your finances.

Final Thoughts

Achieving financial wellness is a journey—one of learning, making choices, and potentially making a mistake or two. But it’s your journey and it involves following the direction that fits your needs, goals, and unique situation.

Financial WellnessMoney Management