Most of us are aware of what it takes to maintain a healthy lifestyle. We do all of the things that we know are good for us, like eating a balanced diet, getting plenty of exercise, and sleeping for at least eight hours. But have you ever thought about what it takes to achieve financial wellbeing? What exactly is it and what financial wellbeing tips should you apply to improve your financial health?
Well, financial wellbeing is the measure of how financially fit and healthy you are, and it’s different for everyone. There’s no set number that, once you reach it, means you’ve become financially “well.” Instead, it means something different for everyone.
Do you have enough money to meet your needs? Do you have the freedom to make the choices you want in order to enjoy your life? These are the kinds of things that measure a person’s well-being when it comes to their finances.
So, let’s dive further into some simple financial wellbeing tips you can start using today. But first, well go over what it is!
Financial wellbeing definition
A few years ago, the Consumer Financial Protection Bureau (CFPB) developed its financial wellbeing definition as: “A state of being wherein you: have control over day-to-day, month-to-month finances; have the capacity to absorb a financial shock; are on track to meet your financial goals, and have the financial freedom to make the choices that allow you to enjoy life.”
When you reach financial wellbeing, it means you have a certain level of security and enough money to meet your needs, whatever those needs may be. When you are financially well, you have enough money to make the choices that will allow you to live an enjoyable life.
Do you notice something missing from this definition? Nowhere in it are any numbers mentioned. That’s because it is not about the numbers. Your version of financial wellbeing will be different from everyone else’s.
For example, a person who has a low income might also have a relatively frugal lifestyle, and thus a positive net worth. They have the freedom to make choices and pay for their expenses and wants, and their financial wellbeing is high.
On the other hand, someone who has a very high salary, but also lives an extravagant lifestyle might have a large amount of debt. Just because they make more money than the other person, doesn’t mean their financial wellbeing is higher.
Why is financial wellbeing so important?
Before we dive into our amazing list of financial wellbeing tips, let's talk about why achieving a sense of well-being with your finances is important. Just like your mental and physical health are important to living your life to the fullest, so too is achieving well-being with your finances.
Some of the key benefits of being financially well and healthy include:
1. The ability to pursue your dreams
Knowing that you have something to fall back on if you fail will allow you to pursue opportunities you might otherwise have passed up.
2. It helps lower your stress levels
Financial wellbeing lets you live a life with lower levels of stress. In an employee survey by PwC, they found that stress due to financial matters was the top cause of stress for their employees and a major distraction at work.
While this was just one company, it is a snapshot of how many people in this country feel about their finances: stress-inducing. When your financial wellbeing is high, however, these money worries and stress levels go way down.
3. It gives you the means to deal with emergencies
Lastly, financial wellbeing gives you the means to tackle any financial problems or emergencies that come your way. This, in turn, can both reduce your stress levels and keep you on track to reaching your financial goals, so it’s a win all around.
How to determine what financial wellbeing means to you
The CFPB has a ten-question questionnaire, which helps you assess your financial wellbeing. This is a helpful tool to see where you stand and what areas you might need improvement in.
They ask questions like how comfortable you are in handling an unexpected expense and whether you have money left over at the end of the month once all of your bills are paid.
It’s also important to understand what wellbeing with your finances means to you; because, like all personal finance, it is deeply personal.
It can also change over time, like when you get married, have a baby, go back to school, get a new job, buy a house, etc. So it’s essential to take stock of your financial wellbeing often, especially after big life changes.
Determining what it means for you will help you better apply the tips that suit you best! Here are some additional aspects of your life to look at to determine what it means to you:
1. Analyze your current and desired lifestyle
Take a look at what you spend your money on now. Is this the type of life you want to keep up, or do you have another desired lifestyle?
Either way, by figuring out what kind of life you lead and what you want, you’ll be able to make better financial decisions for yourself.
For example, if your ideal lifestyle is one where you live in the mountains and ski every day, your day-to-day choices should reflect that desired life. Make sure you are setting yourself up to live this life and that you have the finances to support it.
2. Think about your goals and dreams
What are your goals and dreams for the future? These will guide you in making financial decisions today. One aspect of financial wellbeing is making sure the financial decisions you make today set you up for reaching your goals in the future.
Being aware of your dreams and how much they’ll cost is a great place to focus on when pursuing financial wellbeing.
3. Review your personal core values
If you don’t know them yet, take some time to uncover your personal core values. These are your core beliefs that serve as guidelines for how you show up in the world. Establish your core values and begin to live by them.
This way, you’ll be in a better position to make the choices that will allow you the freedom to enjoy your life.
Once you’ve thought about these aspects of your life and decided what you want for your present and your future, it’s time to develop a financial plan to help you reach financial wellbeing.
8 Simple financial wellbeing tips to start!
Here are some of the key ways to reach or, if you’re already there, maintain your financial wellbeing:
1. Stick to a budget
Creating and sticking to a budget is one of our most important financial wellbeing tips to implement. One of the best ways to maintain control over your day-to-day and month-to-month spending is to set and stick to a budget.
Through budgeting, you’ll become aware of all of your money, what you spend it on, and where you can cut back (if necessary). To get started with building a budget of your own, you can leverage an example budget and learn the ins and outs of budgeting.
There are many budgeting methods to choose from. So find one that you find is easy to stick with!
2. Have an emergency savings fund
Another one of the most vital tips is to have an emergency fund. Being able to absorb a financial shock from unexpected events can prevent you from having financial hardships. That’s precisely what an emergency savings fund is for.
Whether it’s a medical emergency, a trip to the vet, a broken toilet, or any other unexpected expense, an emergency savings fund allows you to take care of these expenses without falling into financial hardship.
Having 3 to 6 months of basic living expenses can greatly reduce your financial stress and worry. You will know that if you are faced with an unexpected financial situation, you have enough of a safety net to cover it without racking up debt!
3. Spend less than what you make
What is one way to ensure that you’ll have enough money to live the life you want to live for the long-term? Spend less than what you make. This doesn’t mean you can’t have fun (there are plenty of ways to reward yourself that won’t derail your goals).
But it does mean that you should be mindful of your spending. If you’ve had trouble with this in the past, why not try a low-spend or no-spend challenge to set you on the right path?
4. Avoid debt when possible
If you want to stay on track to meet your financial goals, maxing out your credit cards or overborrowing will not help get you there.
For instance, you could grab our free debt snowball worksheet! This worksheet goes along with the debt snowball method, where you pay off your smallest debt first.
Then you take that money you were paying on that debt and apply it to the next one, and so on until you are debt-free!
Of course, you could also try out the avalanche method, where you pay off the debt with the highest interest rate first. This can save you quite a bit of money if you can stick with the plan.
Remember, you need a debt reduction plan because paying minimum payments will leave you deep in debt for years!
5. Invest your money
Investing isn’t just for the uber-rich. In fact, knowing how to invest is something everyone should have in their financial toolbox, especially if you want to maintain financial wellbeing.
The great news is, that you don't need a ton of money to start investing.
Investing is how to set yourself up for a secure financial future!
6. Work on your mindset
Improving your mindset is one of our favorite financial wellbeing tips! When it comes to financial health, a daily practice that includes gratitude and affirmations (whether financial affirmations or more general affirmations ) goes a long way.
So rather than thinking or saying, "I never have enough money" say, "I have an abundance of money!"
Switching from a poor to an abundance mindset will do you wonders with your mental health and finances!
7. Utilize financial wellbeing offered at work
Employers are taking note that an employee's wellbeing including their finances is an important part of their happiness. So, some employers are offering programs to help their employees better manage their finances.
These programs consist of financial counseling on topics such as student loans, credit card debt, and more. They also provide access to specific programs that help employees manage their money.
Check to see if your employer offers any of these perks at work!
8. Expand your financial literacy
Expanding your financial literacy is one of the most essential financial wellbeing tips that will help you reach financial success. As they say, knowledge is power. The more you know about personal finance, the better.
Continuously learning how to better your finances is how you keep a tight grip on your hard-earned money. You can expand your knowledge by listening to podcasts, reading financial books, and following fin-fluencers on social media sites like Instagram, YouTube, and Tiktoc.
Try out these financial wellbeing tips to improve your money health!
Financial wellbeing is one aspect of your health that should never be overlooked. It’s worth it to put the time into figuring out what it means to you.
That way, you can live a life with less stress and more freedom to do whatever you dream of doing, no matter what comes your way.
Remember to keep expanding your knowledge on personal finance and inquire about wellbeing at work programs. Following these simple tips will help you improve and maintain your wellbeing.