What Does Financial Wellness Look Like FOR YOU?

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. 

Where are you in your 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. 

No matter your journey, financial wellness involves spending, saving, borrowing, and planning.

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:

  • Healthy: Individuals exhibit positive financial behaviors that will allow them to be resilient and on track for long-term financial success.
  • Coping: Individuals exhibit some positive behaviors but also experience challenges that require significant behavioral change to reach long-term success.
  • Vulnerable: Individuals exhibit poor financial behaviors, are struggling financially, and require immediate assistance and behavioral change to adjust course for long-term success.

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:

  • Having control over day-to-day, month-to-month finances
  • Having the capacity to absorb a financial shock
  • Being on track to meet financial goals
  • Having the financial freedom to make the choices that allow them to enjoy life

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:

Spending

  • Do you follow a budget? Do you utilize online budgeting tools to track your spending and see potential challenges early? If you have yet to create a budget and are looking for additional information when it comes to financial dashboards, check this out
  • Do you pay your bills on time? Take advantage of online bill pay alerts to ensure you never miss a payment.
  • Do you know the difference between your discretionary and non-discretionary expenses? If you don’t, here’s some information to help you determine which category your current expenses fall into.

Saving

  • Do you have an emergency fund set up, truly dedicated to emergencies? 34% of Americans are without savings, so it isn’t uncommon. The adage is true: every penny counts. Start today and save what you can. It will add up. 
  • Do you have at least 3-6 months of living expenses saved? This is especially important if you don’t have disability insurance. 
  • Are you contributing to a 401(k) or retirement savings account? If your company offers a match, take advantage of it. 

Borrowing

  • Do you have a clear picture of your current debt? This could be credit cards, auto/mortgage loans, student loan debt, etc. Those same online financial dashboard resources allow you to link all your accounts for one clear picture of everything you have outgoing.
  • Are you currently dealing with student loan debt? Have you looked into your student loan repayment options
  • Are you planning to make a large purchase in the near-term (think vehicle, house, engagement ring)? Take advantage of online budget calculators that will help you determine how much you can afford.

Planning

  • Do you know how much you should be contributing to your retirement account to ensure you can retire comfortably? Online calculators can help you determine what your retirement funds will look like, based on your age and current investments. 
  • Have a little extra money you’re thinking about investing? Here are a few tips to consider before you test the investment waters. 

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. 

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