In our recent blog post, ‘What is Financial Wellness?’ we defined financial wellness as a term used to describe the state of one’s personal financial situation. One of the key phrases in that statement that we didn’t elaborate on is ‘personal financial situation.’
Financial wellness is personal. Financial wellness programs must be unique to each individual, tailored specifically to one’s current financial position. For a financial wellness program to benefit each employee utilizing the products and services, it must meet individuals exactly where they are in their financial journey.
There are many dimensions to financial wellness, including the amount of savings you have, how much you’re putting away for retirement and how much of your income you are spending on fixed or non-discretionary expenses. However, your cashflow will fluctuate depending on where you are in your personal financial journey.
If you’re just starting out in the workforce, your focus is less on retirement than Baby Boomers who are nearing the end of their careers. If you have yet to start a family, you’re not concerned with the cost of sending your child to college and how much you need to put away each month if you intend to help them on their journey. If you own a car or a home, you know you need to (at least) save for routine maintenance and (at most) the unexpected mechanical failure or home repair.
A solid financial wellness program will help you identify where you’re are in your journey and how to set appropriate goals and benchmarks to achieve financial freedom.
Financial wellness gives individuals the ability to pursue opportunities due to the stability of having a day-to-day financial system, which includes the capacity to spend, save, borrow, and plan. Your success in each of these categories is used to define and measure your financial health. It’s important to note that this is an ongoing process. It’s a journey. If your financial health score is stagnant, it’s probably time to reassess your financial plan and focus on behavioral changes that will have a positive impact on your overall financial health. We calculate your financial health using the Financial Health Network’s FinHealth Score™ to diagnose, track, and ultimately improve the financial health of individuals. Here are the three classifications:
Your spending, saving, borrowing, and planning habits dictate where you fall in the realm of financial health.
So how does this play into your overall financial wellbeing? What does financial wellness look like FOR YOU?
The Consumer Financial Protection Bureau (CFPB) studied consumers across the country and concluded these four elements were universally acceptable as financial wellness:
This CFPB research is spot on with what we’ve experienced through our own members. You must determine your own personal path for each of these categories in order to define what financial wellness looks like for you.
If you’re not sure where to begin your personal financial analysis and you don’t have access to an online assessment tool, here are a few ways you can begin to identify what financial wellness looks like:
Talk to a financial coach or financial counselor. That’s what they’re there for – to provide their expert recommendations and guidance when it comes to specific financial concerns.