Any stage of life comes with a struggle with finances: you start your first “real” job, you need a bigger house for your growing family, your oldest is getting ready to apply to colleges, or your retirement nest egg isn’t as big as you think it should be. Is there ever a time when you can enjoy financial peace of mind? Financial well-being may seem elusive, but it is achievable at any stage of life.
What Is Financial Well-Being?
There is a lot of buzz about well-being when it comes to physical and mental health, but less chatter about how the state of your finances can give you that feel-good vibe. More than just those exciting moments when you get a bonus at work or make your last car payment, well-being is a state of general happiness and contentment. Having a sense of well-being about your finances means you can:
- Be in Control: Confident financial management is an essential part of financial well-being. It does not necessarily mean you have a lot of money, but it means you know how to manage your funds to cover your expenses. You pay your bills on time and don’t have big money concerns.
- Be Resilient: Unexpected expenses, like medical bills or emergency home repairs, can disrupt your otherwise well-managed finances. Financial well-being means you have a safety net in place that may include emergency savings and insurance to help you pay those unexpected expenses rather than letting them become long-term crises.
- Be Flexible: Making choices is one of the things that helps you define yourself as an individual. You may choose to pursue a hobby, have a big family, or become a world traveler. When you have the financial flexibility to make the choices that are important to you, you’ve achieved well-being.
- Be Persistent: The things you want in life are within reach if you are experiencing financial well-being. You will need to be patient and make some sacrifices, but you know you can achieve your desired goals, like a new house, a special family trip, or early retirement.
Attaining financial well-being can even reduce stress and have a positive effect on your physical and mental health. A poor financial outlook can cause stress, which can lead to health issues and a downward spiral: The cost of healthcare for treating chronic disease and long-term health problems can detract from your feeling of financial well-being.
Improving Financial Well-Being
Financial well-being is not just about money; it’s about wellness. And it is within reach for everyone, no matter your age, income level, or life circumstances – depending on your mindset and the actions you take. It may take coordinating several aspects of your financial picture and can look different for everyone. Consider making changes in these four areas to improve your financial well-being:
- Budgeting: Perhaps the most essential activity for attaining financial well-being is keeping a budget. Tracking how you spend your money will help you gain a sense of control over your finances. Knowing where your money is going can help you make good financial decisions that can improve your overall financial well-being. Budgeting can be very simple and require no special tools or investments, or you could take advantage of various tools designed to help you stay on track with your budget. Either way, learn how to budget and get started right away.
- Preparing for Emergencies: An emergency financial plan should start with a savings fund. Be sure to put aside money to deal with any unexpected expenses that arise. You should also save enough money to cover three to six months of living expenses in case you lose your job. Insurance products can be part of your emergency preparation since the right policy may help you recover financially from unexpected losses to your home, auto, or business.
- Borrowing Strategically: Credit can be used to get more credit, which could improve your overall financial picture. The key is to make wise choices about borrowing and always protect your credit score. Strive to keep your debt-to-income ratio below 36%, make loan or credit card payments on time, and pay off debts early when you can. Always try to save up about 20% of what you need for a large purchase before borrowing the rest. This practice will strengthen your borrowing position and can feel rewarding.
- Planning: You can tackle those big life goals without extra stress by making plans in advance. It takes time to save the money you’ll need for a down payment on a house or college tuition. By taking the time to make a plan, consulting your budget, and saving money over time, you can improve your financial well-being and achieve your financial goals at the same time. Planning and patience can help you see that you can meet your financial obligations today while saving for your future goals.
Financial well-being doesn’t have to be a dream. You can make it a reality and maintain it as a lifestyle. If you need help charting your path to financial well-being, contact your financial institution. They have the expertise to answer your questions and the financial instruments you may need to make financial well-being your way of life.