As we get older, we start to spend more time thinking about our health and wellbeing. We start taking vitamins and eating kale. We start counting steps, take up running, and explore yoga. Yet, one thing we still tend to neglect is the need for financial wellbeing. A 2018 survey by Bankrate reported that 30% of respondents claimed to worry constantly about their finances. Financial stress can lead to mental and physical stress, so neglecting your financial wellbeing is bad for your health too.
The Consumer Protection Financial Bureau (CFPB) published a report in which they defined financial wellbeing in a way that had more to do with planning and behavior than wealth. The good news is that you can achieve financial wellbeing. Here is how anyone can achieve financial wellbeing.
Have control over day-to-day and month-to-month finances. The first step in financial wellbeing is having enough money to meet your daily and monthly obligations. This means taking a detailed look at all of your expenses from the daily stops for coffee or trips to the vending machine to student loan and mortgage debt. A financial planner can help you create your initial budget, but many financial institutions also have tools to help you create and evaluate your monthly expenses. There are even apps that will give you a daily spending allowance.
Have the capacity to absorb a financial shock. Once you get a handle on your budget, it gets easier to prepare for the unexpected financial shock. Whether it is a sudden illness, car repair, or job loss, you’ll feel a lot better knowing that you have some reserves set aside to get you through these tough times. Depending on your age and circumstances, you’ll probably want to work to set aside between one and three months worth of expenses in an interest-bearing savings account.
Have your money work to help you reach your goals and enjoy your life. Ultimately, you should be putting your money to work for you to help you achieve your goals and live the life you have imagined. Financial wellbeing means having the capacity to buy a home, send your kids to college, travel to the destinations on your bucket list, and retire when and how you want. Talk to your financial advisor about those goals and how you can best invest today and plan for tomorrow.