Money provides access to products and services, and affords people choices and opportunities. Money can bring a sense of security, peace of mind, economic freedom and enable options that help a person seek and achieve a lifestyle that promotes life-wellness. Money or the lack thereof, has a huge affect on a person's life. The symptoms and consequences of poor financial health, disease and instability in individuals, corporations, and nations seems to be more common these days. We often hear of or know people living month to month, spending more than they make while maintaining a negative net worth. Financial headlines can be unsettling thus making personal finance seem more complicated and unstable.
It is easy to understand why financial wellness is interconnected and why it directly affects the other dimensions of life-wellness. Financial health and wellness can be defined as a "state", "level" or "quality" of a person's financial health or wealth. Financial health and wellness can be created, conserved or lost and will fluctuate between changing circumstances. For instance, a couple's budget will increase when they have children and decrease when their children leave home. It can also be defined as a state of being healthy, happy and free from any financial worries and stressors. Being able to live your desired lifestyle for the rest of your life without financial anxiety or fear. Some people define financial wellness as having a clear understanding of their financial situation and having the ability to live within their financial means. Financial health and wellness will mean different things to different people and that usually has to do with their situation, ambition and abilities.
Regardless of how you define it, you should take care of your personal financial wellness in such a manner that enables you to be prepared to handle any financial challenges that may arise.
For some people it might seem far easier to shy away from learning and dealing with their financial health and wellness. As with the other dimensions of wellness, it's happening so the questions breaks down to whether you actively or passively participate.
The first step is to assess and establish a gauge by which you measure your current financial wellness. Your assessment and gauge will change many times throughout your life because Financial Wellness is an ongoing, dynamic, fluctuating process.
You also need to develop a healthy awareness and understanding of your personal circumstance and what steps you're taking to improve the state of your financial situation. Work towards creating a balance between how you think and handle money. Knowing where money comes from and where it's going is also important.
While some people will manage their financial goals, others will seek out the services of financial advisers. Your perception of your circumstance and personal finances maybe off or limited in some way so it's usually a good idea to seek out finance help when you need it. However, it's best to remain totally engaged in your finances and not in the hands of other people, regardless of their title or advice. They can give advice but it's your responsibility to stay informed and make decisions about your own finances.
In addition to creating a financial plan, it's also a good idea to keep a journal that includes the questions such as the ones listed below and your answers to those questions. Create new versions of the journal as needed and keep the old ones to monitor your progress. This is your personal journal so feel free to answer sincerely. Also remember that no one is judging you and this is all about your personal development.
What is your current income?
Your income is amount of money you actually receive after taxes and other items such as health insurance or retirement plan are taken out.
What are your expenses?
Tracking your expenses means you will know where your money is going.
Do you maintain a budget?
Budgeting allows you to direct your money towards the things in life that are important to you, and helps you spend less than your income.
Do you live beneath your means?
This is the first rule to establishing financial independence. Living by this rule will allow you to reach your financial goals faster, and with a lot less stress. Living with Financial disease will affect your life and those around you a negative manner. Examples of financial disease include living month to month, spending more than they make while maintaining a negative net worth.
What is the amount of savings in the bank?
Know the amount and interest rate in your savings account. Savings provides you with flexibility when opportunities arise and prepares when you have unexpected expenses. Savings also provides financial security in retirement.
Do you balance your checkbook regularly?
Balancing your checkbook on a regular basis helps you accurately monitor your financial situation and maintain a budget.
Do you pay your bills on time? Paying your bills on time is the best way possible to build a good credit history. Not paying your bills on time tends to create some stress and anxiety in most people.
Do you know the total amount of debt you have?
Knowing the amount of money you owe allows you to maintain and adjust your budget and create a plan to cut down or eliminate your debt. Debt free means not paying high interest rates or fees.
What is the outstanding amount on your credit card?
Pay off your credit cards means you'll save incredible sums of cash by not paying high interest rates and/or fees. Credit cards are usually the most expensive form of debt so commit to always paying more than the minimum required on your credit card. Paying the minimum amount required on your credit card is only paying interest rate and never paying off the actual load you created when you barrowed cash or made a purchase. Checking the interest rate on your credit card statement periodically will probably discourage you from making unnecessary purchases.
Do you have a pension or retirement account?
If you have a pension plan, make sure you have all the necessary paperwork and information. Figure out how adequate will your pension will be when it's time for to retire in 15 or 25 years from now.
Do you have a retirement account?If you do not have a retirement account, check if you employment has a company sponsored retirement plan. Company sponsored retirement plans through payroll deduction and often tax-deductible contributions are a great way to accumulate significant savings.
How much is in your retirement account?
Knowing how much is in your retirement account and how much you're contributing will help you plan for the future.
Do you know where is your retirement is invested? Know the name of company, contact and account information of the company that is holding your 401 retirement account. Know if you money is invested in high, balanced or low stocks, bonds or treasury bill for example. Remain engaged, monitor and make changes as needed.
Do you know what your net worth is?
List the value of what you own and what you owe. The difference between the two numbers is your financial net worth. Save this list, date it, and compare it to your current year's progress. You'll be amazed at how much difference a year makes in your finances.
Do you plan for major expenditures?
Take the time to plan and figure out if and when you can afford to make a large purchase, investment or commitment such as a house, new car, college education. A little planning goes a long way.
Do you currently have and manage personal funds? It's always a good idea to have a few personal funds for various things such as school, taxes, vacation and major expenditures. Try to add money to each fun on a regular basis if possible. It's critical to have a "rainy day" fund with saving equal to six months of living expenses. Six months of living expenses should provide an adequate cushion to weather most unexpected financial storms. The rainy day fund is for emergencies only and should be used to purchase items such as a big TV or to go on vacation. Developing solid saving habits will help you reach your short and long term financial goals.
Do you have a Last Will and Testament or a Living Will? These documents are essential steps for all adults, especially those with dependents and/or love ones. A Last Will and Testament is a legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provides for the transfer of his/her property at death. A "will" has historically been limited to real property while "testament" applies only to dispositions of personal property, though this distinction is seldom observed today. A living will is a legal document that a person uses to make known his or her wishes regarding life prolonging medical treatments. A living will should not be confused with a living trust, which is a mechanism for holding and distributing a person's assets to avoid probate. It is important to have a living will as it informs your health care providers and your family about your desires for medical treatment in the event you are not able to speak for yourself.
Do you need a financial advisor?
Seek the help a financial advisor if you have questions or when making tough financial decisions. Do your own research before making any decisions.
How could financial advisers help you?
Financial advisers can provide information, options and help you create a budget or a retirement plan.
Do you currently have periodic progress review? Every month or every other month take the time to review your financial situation and see where changes are needed.
How often do you work on updating and improving your financial planning, goals and objectives?
Do work on financial wellness every day, once a week, once a month, once a year, or never? Try to spend a few minutes per day, if possible, on learning and improving your financial wellness state. The main thing is that you allocate time out of your daily or weekly busy schedule towards gaining a better understanding of finances and how how to make them work for you.
Continue to educate yourself on how to develop and improve the state of your financial health and wellness for it's an ongoing process that will always remain with you. Read financial publications and consider taking a course on basic financial management or investing. Remember that life is happening so it's best to actively participate.