Why Your Financial Wellbeing Is So Important And How To Boost it

Would you skip a doctor’s appointment?

Of course not! It’s important to know the status of your health.  This information helps you make smarter decisions and form better habits.

But, far too many people don’t check their financial health. They continue making the same choices, are stuck in bad habits, and hope that things will magically get better. More often than not, they don’t.

Over time, their sense of financial wellbeing declines. It takes a toll on them, which can lead to problems in other areas of their lives, too.      

What Is Financial Wellbeing?

You go to the doctor at least once per year for a check-up. During the visit, your physician explains how you’ve changed, what’s happening now, and how to plan for the future. 

The same is true for your financial health. It’s important to see how your financial position is progressing, your current situation, and the things that may lay ahead.

The Consumer Financial Protection Bureau (CFPB) describes financial wellbeing as having control of your daily and monthly finances.  This status gets achieved when you can weather financial storms and are working towards SMART financial goals. You have some degree of financial freedom, which allows you to make choices and enjoy life.

Signs of Financial Wellbeing

• Paying bills on time
• Not taking on consumer debt
• Meeting your financial needs
• Stable income
• Following a budget
• Financial stability 
• Low financial stress
• Setting SMART financial goals
• Growing a nest egg

Individuals experience financial wellbeing when they live in a state of comfort and contentment. They’re in control of their money and feel secure.

These people spend according to their needs and wants. But, also have enough money to save, invest, and grow their nest egg!

When you experience financial wellbeing you have a plan for today, tomorrow, and the unexpected.  This helps you to live in the moment and be somewhat financially stress-free!

Why Financial Wellbeing Is Important

Would you be able to come up with $1,000 cash if you needed it today?

According to a PwC employee financial wellness survey, 38% of workers wouldn’t be able to. These workers are like many others – they struggle to budget and pay bills, which leads to stress, anxiety, and worse!

Your financial wellbeing is part of your overall health. When it gets out of balance, it can take a toll on your physical, social, and mental health.

The same PwC survey found that 58% of employees experience financial stress. The research found that it’s the main reason that workers get distracted on their jobs. Often, these employees live paycheck to paycheck, have little to no savings, and don’t believe they’ll ever reach their financial goals!

Another article reveals that there is a connection between financial and mental health. This study found that almost half of the participants that had poor financial wellbeing also had a mental health problem!

Poor financial wellbeing often leads to physical health problems, too. The uncertainty and pressure of making ends meet can bring worry, stress, and insecurity.

This added burden often affects our ability to sleep. A lack of rest makes it more difficult to concentrate, which lowers performance and productivity levels.

Financial stress and instability can occur in everyone, regardless of income. High-income earners are sometimes more susceptible to it than low-income earners. They often work in stressful and demanding jobs. Some have golden handcuffs, yet still live paycheck to paycheck. They get forced into using their time  just to work and survive!

Poor financial health negatively affects your life. But, it doesn’t have to.

Instead, you can choose to increase your financial wellbeing. When you do, your overall health will get better, too!

How To Improve Your Financial Wellbeing

The best measure of your financial wellbeing is your net worth. It shows your true wealth and the degree of financial freedom that you have.

Follow these 5 steps to increase your net worth and improve your financial health.

• Step 1: Budget
  • Follow a spending plan
  • Save and invest to create long term financial sustainability
  • Track Your Money: use a Personal Financial Statement  or Personal Capital
• Step 2: Emergency Fund
  • Save 4-6 months of living expenses
  • Increase it by 2-4 months during a financial crisis
• Step 3: Eliminate Debt
  • Use one of the two systems to get debt free
  • Don’t take on new consumer debt
• Step 4: Grow Your Nest Egg
  • Spend money according to your values
  • Practice conscious consumption
  • Get help when you need it 
  • Find balance between needs vs wants
  • Determine what is enough money
• Step 5: Give To Charity
  • One study shows its the secret to lasting happiness
  • Boosts your sense of life satisfaction

At least once a quarter give yourself a financial checkup. Review your financial position and check your progress. Look at the events happening now and those that may lay ahead. This ensures your immediate needs and wants get met, while you’re planning for the future.

Your financial wellbeing is important to your progression up the Hierarchy of Financial Needs. It helps you understand where you are and the choices you need to make to achieve the future you want

Monitoring your financial wellbeing is about more than just money. It has to do with maintaining your overall health, so you have the ability to work towards your dreams!

What are you doing to increase your financial wellbeing? Comment below.