“When it comes to your finances, ignorance is never bliss. The less you know, the more you end up paying.“
As per the statistics provided by Mint, workers earning more than $100,000 a year are 18 percent more likely than the general population to be living paycheck to paycheck every month. And, probably our unwanted expenditures, with little to no attention to saving money, is one reason for it. Consequently, we end up with nothing but a lot of stress and anxiety in our day-to-day lives.
Finances will most certainly be tight when you first start your professional career. By the middle of your job, you’ll have plenty of other new responsibilities to meet, all of which will require additional financial resources.
But, what if one fine day, you come to find out that all of it is unmanageable, due to fewer savings in your account or a bad credit score?
That is when financial stress starts piling up on your mind, heart, and eventually, it even brings down your overall health. Because of this, we recommend that now is the right time for you to think about your financial wellness.
The current economic climate presents unique obstacles, and it doesn’t matter if you’re a boss or a worker… So, how does one keep cash flowing?
Well, financial wellness tips are the only thing that can keep you sane both economically and physically. Let’s talk about essential financial wellness strategies for preserving your financial well-being through difficult economic circumstances.
But, before that, we have much to talk about…
Defining Financial Wellness
“Being in control of your finances is a great stress reliever.“
Put another way; financial wellness is the state of one’s total economic well-being. It refers to your ability to deal with unexpected expenses in a timely and effective manner. Having control over daily and monthly costs is a part of the entire planning process.
Aside from salaries, there are a variety of other forms of business expenses to keep an eye on every month. However, it does not necessarily imply that you need to have millions or billions in the bank; instead, it means that you must be able to meet your own personal financial commitments, while also having a strategy for building your retirement resources.
What Should Your Financial Wellness Goals Look Like?
Your ultimate financial goal should maximize earnings while simultaneously minimizing expenditures as an earning member. There are numerous ways to achieve this goal, including lowering your daily, unhealthy eating expenses and increasing homemade cooking habits.
Inculcating this into your everyday routine will help you live a healthy life. You will have an inner peace that savings are increasing day-by-day in your bank account.
Your financial wellness goals should include a future in which you are risk-insured, have a reliable income, and improve your quality of life. Your assets should be generating cash flow for you, and your liabilities should be decreasing.
Importance of Financial Wellness
To effectively manage your money, it’s also critical that you put your financial knowledge to work for you. If you grab your credit card every time you feel the urge to indulge in some retail therapy, you’ll be moving backwards… And ultimately, financial literacy becomes a waste of time in your case.
Listed below are seven financial wellness tips that might have a significant impact on your financial future:
Organize Your Accounts
There are various bank accounts with different amenities and services for their customers, depending on the region you live in and the bank you choose.
Most of your day-to-day transactions should preferably be handled through a current account. If you meet specific requirements, you may be able to open a free account, which certainly varies from bank to bank.
Online banking allows you to keep track of your cash credited and debited from your account through your computer or smartphone. You can also apply for cashback and rewards by depositing your salary into specific accounts. Make sure to research properly and find the deal that works best for you.
When looking for savings and contingency funds, seek accounts that provide interest. These accounts may also provide rapid access, but the bank accounts that pay higher rates of interest demand advance notice of withdrawal, so be aware that it can take anywhere from a few days to several weeks or months.
Create an Emergency Fund
When a hefty bill arrives unexpectedly at your doorstep, it can eventually become extremely stressful and detrimental to your financial well-being if you aren’t prepared.
For instance, what if all of a sudden your pipes burst in the winter? Good emergency savings should be able to cover your living expenses for three to six months, including things like mortgages or rent, loan repayments, electricity and gas bills, and groceries. Savings accounts or, at the very least, investments that can be swiftly liquidated, should be the primary repository for the emergency fund’s assets.
When a large sum of money is left unaccounted for, it can add up quickly. Maintaining a little emergency fund and having saving account investments that can be cashed in when needed is another alternative. This lets you earn some interest or dividends on your funds.
Start Saving As Early As Possible
An early start cannot be stressed enough when saving for a long-term goal.
The earlier you begin, the better off you will most likely be during your retirement years. This is because of the force of compounding, which Albert Einstein called the ‘eighth wonder of the world.’ Compounding refers to the ability of a financial asset to generate earnings, which are subsequently reinvested to create more payments. Simply put, compounding refers to the process of developing earnings from prior profits.
It is preferable to begin saving as soon as possible to achieve your long-term financial objectives, but don’t let your age stop you from your financial goals. It’s never too late to start!
Work With Budgeting
One of the best financial wellness tips in 2022 is to work with a budget.
We all have our financial vices, and it’s all too simple to reach into your wallet and pull out a credit card to pay for something you like. But, we’re taken aback by a large credit card bill at the end of the month, and sometimes can’t pay it off in its entirety. Thus, budgeting matters!
Monitoring your spending is the first step in creating a well-planned budget. Thankfully, a variety of online software exists that will scan your receipts, organize your expenditure, and total it all up at the end of the month.
So, it’s certainly possible to keep track of your bills as the month goes by. If your budget limit is approaching, you can reduce your costs to the extent necessary to reach your objective.
As soon as you understand where your money is going, you can assess whether or not any expenses can be cut. It will enable you to create a monthly budget for yourself.
Stay Secure with Insurance
There are two types of insurance that you need to protect yourself and stay financially healthy:
- Disability Insurance
As per statistical evidence, you are more likely than not to become incapacitated at some point during your working life than you are to die. Having disability insurance might be highly beneficial if you cannot make an income from your current job.
- Life Insurance
The importance of life insurance cannot be overstated for two reasons;
First and foremost, it provides tax-exempt funds to pay any owed estate taxes. In other words, your heirs will not be forced to liquidate assets to fulfill their tax liabilities.
Secondly, it provides finances to your loved ones so that they can sustain their current level of living in your absence. You are keeping your family safe financially.
Contemplate Future Expenses
As soon as you retire, you surely do not want to think about your financial future. (I mean, that is too late). Financial planning is essential to a happy and healthy future. Nobody wishes to spend their golden years panicking about credit card payments or debts. You will already have your health to worry about, and you certainly do not need to add financial stress to this mix.
Put even a tiny amount into your Retirement Savings Plan when you’re just starting in your profession. Even a few hundred dollars a month can go a long way toward saving for a home, healthcare costs, retirement, and other necessities.
When you’re in your 40s or 50s, it’s time to create a precise financial strategy. Working with a fee-only financial advisor to figure out how much money you’ll need for a pleasant retirement may be a good idea. It may include finances for hobbies, sports, and travel, along with your basic living needs.
So, go ahead and add this point to your must-remember list of top financial wellness tips.
Tax Planning is Must
The most important thing to remember if you are in the highest tax bracket is to do everything to reduce your tax burden.
You may do several things to reduce your financial load, especially if your partner earns less than you. Some of these are as follows:
- Open a savings account for your spouse and kids
- Seek help from a tax accountant.
Taxes are something that no one enjoys doing – which is why tax preparation can be a crucial component of any financial wellness program.
Debt is not always bad!
Instead, ‘good debt’ is a beneficial investment in your long-term financial well-being; while, ‘bad debt’ is a money-sucking burden on the economy. A bad debt example would be a loan on a brand new car that loses value immediately after being purchased.
There are times when debt becomes an issue, such as when you can’t pay it back.
In such circumstances, you can take the help of the snowball or avalanche method to get ahead of your lenders and pay off your debts on time.
Snowball Method: The snowball strategy entails paying the smallest weekly or monthly payment possible on all of your debts. You next utilize the money you’ve saved to pay down the smallest deficit of all. Paying off the first minor debt is the first step toward eliminating all of your debt.
This way, you get a steady stream of tiny victories, which might be helpful if you are overwhelmed by debt. The faster you can pay off each loan, the more money you have available to put toward paying off the next one, until all are eliminated.
Avalanche Method: Although both snowball and avalanche methods aim towards debt management, there is one difference. It is preferable to pay off the highest interest rate debt first, rather than a smaller balance in this one.
The avalanche method is less expensive in the long run than the snowball method, but it is more challenging to accomplish the rapid triumphs that keep you motivated in the long run.
Remember that managing your money involves equal amounts of earning, spending, and investing. Do not think of compromising on any of it. All you need to do is discover the right approach that works for you and stick with it!
Creating financial objectives and building a budget will help put you on the road to financial wellness and improved financial health. So, make sure that you go for it.
After all, managing your finances is the best way to stay happy and calm!
Suhana Siddika, Clinical Nutritionist
Health Trends Alert