The ever-rising cost of living and the COVID pandemic has left many people in tough financial situations. About 42% of Americans admit they have less money than usual to spend on bills since the pandemic began, according to Pew Research Center. Another 30% are worried about their increasing debts and being unable to save enough money for retirement.
Everyone, including the world's richest, can relate to financial problems at one time in one way or another. The effect of debt and lack of enough savings can be detrimental to your financial health and overall wellness. However, with basic financial literacy skills, you can improve your life and overcome hardships.
What is Financial Wellness?
A simple definition of financial wellness is being both satisfied with your financial situation and your ability to achieve your goals. Too often, we equate financial health with how much money we make, but being healthy financially goes beyond income. It encompasses having enough money to pay your bills and some left over to save or invest. To achieve greater financial wellbeing, it's crucial to define what is meaningful to you, then measure your progress toward meeting those goals.
How Does Financial Wellbeing Affect Your Overall Health?
Being financially healthy can considerably improve your general wellness. You enjoy peace of mind and long-term potential benefits that come with increased savings, investments, and other smart financial decisions. Further, you are happy achieving your goals promptly and chasing your dreams successfully.
If you don't manage your finances wisely, it's easy to feel stuck and hopeless. This comes with many other adverse consequences that impact every aspect of your life, including your career, mental and physical health, as well as relationships.
Tips to Improve Your Financial Wellness
The secret to achieving financial wellness is through financial literacy. Here are some tips that could help you improve your financial health and overall wellness.
Create a Savings Goal. So many people fall short of their financial goals because they never actually set them. To hit a savings number, know what it is. By creating an achievable monthly savings goal, you can better manage your expenses and ensure your hard-earned money is going toward what matters. As a general rule of thumb, try saving at least 10% of your monthly income, or more if possible.
Start Tracking Your Spending. Whether you live paycheck-to-paycheck or have a little padding in your account, it's important to track how much money you earn and spend. It can give you a clear view of where your money is going and where you need to make cuts to save.
Diversify Your Investments. One of the most critical financial decisions to make is deciding how much risk you want to take on when it comes to investing. Spread your money across different asset classes like stocks, bonds, cash, gold, and more to help mitigate the investment risk, particularly during a recession. It also helps protect your assets in case one sector does poorly.
Have an Emergency Fund. Creating an emergency fund for unexpected expenses is crucial, as it keeps you from racking up large amounts of debt when you're in a financial pinch. It can also enable you to feel more secure about your overall finances because you will be able to make smart spending decisions, knowing there's money set aside for a rainy day.
Getting your finances in order is not an easy task, yet it's worthwhile. It can help you reach some of life's most vital goals and improve your mental and physical health.