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What is Financial Wellness and How Does it Improve Your Life?

10/26/2020
By Corey Lewis, CPT, CSCS

When talking about mental health, it is discussed under one generic umbrella of “wellness.”However, wellness is very complex, and there are different types that need to be discussed separately. For example, intellectual wellness is different from social wellness, but both are equally important in your life. So, what is financial wellness, and why is it important?

What is Financial Wellness?

Financial wellness involves effective management of expenses and income streams. Learning how to save, invest wisely, minimize unnecessary spending, and planning for the future are all incredibly useful skills.

Family saving money to piggy bank learning what is financial wellness.
Learning How To Save And Invest Wisely, Are All Incredibly Useful Skills In Every Step Of Your Life (Image Source: Shutterstock)

In today’s world, money is so important, but it can also be so fickle. It is easy to lose money that took years of hard work, in a matter of minutes. It is a skill that is crucial in every step of your life, starting from high school until you retire.

Financial wellness is so important because it can be the root cause or trigger for mental health problems. Many people realize this quite early on in life, before they even become a working adult. Some national surveys over the years have found that almost seventy percent of college students worry about their finances. It also found that financial difficulties proved to be a huge hurdle for focusing on studies, with some skipping classes to work part-time to cover their bills.

The problem is that there is no fixed formula to teach people about financial wellness. There are so many variables involved, that the only way to learn is by making mistakes as you go along.

How to Save Money

There are a myriad of ways to save money, but the key to figuring it out is learning the difference between your wants and needs. People waste so much money because they can’t discern between their wants and needs.

In some ways, the internet has made it easier to save money—for example, making it easier to find reviews and information before purchasing an item. However, in today’s world, where people can order things at the click of a button and pay cashless, it has become more tedious than ever to keep track of expenses.

Here are some of the simplest ways to save more money according to America Saves:

  • Use cash instead of cards.
  • Use money saving apps to track income and expenses.
  • Use internet banking to automatically set aside funds as you get paid.
  • Unsubscribe from email lists to avoid temptations.
  • Plan ahead and create a budget.

Create a Budget

There are plenty of tools and apps that will help you with budget planning, or you can keep it simple and create an Excel spreadsheet detailing your incomes and expenses. The key to planning a proper budget is to wisely identify your needs, such as food and bills. Understanding your income and expenses is the first step toward financial wellness.

Happy couple sitting and managing expenses at home.
The Key To Planning A Proper Budget Is To Wisely Identify Your Needs (Image Source: Shutterstock)

To create a budget:

  1. Firstly, figure out your disposable income, which is your income after tax.
  2. Take a moment to brainstorm all your needs, including loan repayments, food, bills, or rent.
  3. Choose a time frame on which to base your budget, either a year or several months. This obviously depends on each individual and their unique life decisions. 
  4. Once you’ve set aside the “necessities,” think about allocating a portion of the remaining funds to an “emergency fund.” As a rule of thumb, an emergency fund should cover two or three months of your necessities if you were to be suddenly unemployed.
  5. Automate your emergency fund payments to ensure your savings are consistent and don’t get spent.

Sometimes, you may find that no matter how much you cut down on unnecessary expenses, there is a limit to how much you can save. In this case, start looking at better income streams or smarter investments. For example, try picking up a side hustle like tutoring, selling products online, or freelancing.

Here are some more tips on how to save money and build wealth:

How To Manage Your Money (50/30/20 Rule) – Marko – WhiteBoard Finance

Healthy Lifestyle on a Budget

Financial wellness and physical wellness don’t have to be at odds. A lot of people have the misconception that you need to have lots of money to lead a healthy lifestyle. While it’s true that fitness equipment, gym memberships, and supplements can cost money, it is still possible to live healthy on a budget.

Couple in sportswear is holding a shopping bag full of healthy food.
Its A Misconception That You Need To Have Money To Lead A Healthy Lifestyle (Image Source: Shutterstock)

There is a plethora of advice out there about living on a budget, but here are a few salient ones:

Food and Drink:

  • Meal prep whenever possible, as buying bulk ingredients can save money.
  • Prepare your own lunches to bring to work.
  • Cook in bulk and freeze leftover food.
  • Buying frozen or canned foods can be just as good as buying fresh fruits or vegetables.
  • Minimize how often you eat out, by carrying filling snacks while you travel.
  • Sometimes, grocery stores sell ugly” or deformed fruits and vegetables at discounted prices.
  • Invest in a travel mug to minimize ordering coffees or teas on the go.
  • Cut out paper towels wherever possible in the kitchen, opting for dishcloths instead to clean up.

Physical Health:

  • Determine if you really need a gym membership, or if you can order some basic workout equipment and do those exercises at home.
  • Cycle or walk to work instead of driving to save fuel costs.
  • Invest in your health by doing routine medical checkups to prevent bigger problems from developing, and needing more expensive treatments.

Smart Spending While Having Fun

One of the hardest expenses to plan are your hobbies, particularly things like travel. There are so many unknown expenses and temptations along the way. Knowing how to budget for a trip can cut down on your spending drastically and promote financial wellness while on vacation. Here are just a few tips:

Couple planning their trip looking at map at home.
Knowing How To Budget For A Trip Can Cut Down On Your Spending Drastically (Image Source: Shutterstock)
  • Plan things in advance and take advantage of seasonal discounts.
  • Download maps and save them offline in advance so that you don’t waste money on roaming.
  • Save money on food by avoiding tourist areas or packing your lunch beforehand.
  • Research to see if there are free activities on offer, such as walking tours or free museum entry.
  • Skip in flight snacks and pack your own.
  • Sometimes return flight tickets aren’t the cheapest option, do some shopping around to see if buying two one-way tickets is cheaper.

When it comes to financial wellness, there is a steep learning curve as you’re thrust into the real world. Fortunately, all it takes is a bit of planning and research. Most importantly, don’t feel regret for making mistakes. Financial wellness will always be an uphill learning curve, and that’s okay.

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