What does the term “financial wellness” mean to you? For some people, the phrase means a way for you to have all the luxuries and comforts for your home and family without being restricted by your finances. For other people, it may mean financial stability where your income is greater than your collective debt as you can comfortably live within your means. For some, it means financial independence.
Basically, financial wellness means all of these things. When you are financially well, your generated income is continually building wealth throughout your lifetime. You can easily afford to pay for all your living expenses and other debts as you have a low debt-to-income ratio. In addition, you are able to save money for emergencies and invest money toward your retirement. In time, you may work less while your income increases as your money works for you through investments.
Aspects of
Financial Wellness
There are several aspects of financial wellness: low or
non-existent debts, building up savings, and having investments geared toward
increasing personal wealth. Financial advisors will normally tell you that
these three aspects can be achieved by anyone in the following three ways:
Eliminating or
Reducing Credit Card Debt
Trying to get out of credit card debt can be difficult, as many
people will obtain more credit cards to pay down their other, higher-interest,
credit card balances. This issue leads to a continuing debt spiral that can be
increased by a range of other debts such as mortgage loans, student loans, and
car loans.
Taking steps to eliminate credit card debt and lowering other
debts can help you keep more money in your pocket, which can then be used
toward your savings and investments.
Building an
Emergency Fund
An emergency savings is your way of covering any unexpected
debts and expenses that may arise. The funds can pay for living expenses if you
lose your job, experience a medical emergency, or if there is an accident where
you must pay for costs of repair – such as damaging your car or your house
experiences a disaster. You should have roughly 6 months’ worth of your current
living expenses saved in an emergency fund.
Unfortunately, most people don’t have an emergency fund set up,
or they may not have enough money in the fund to cover long-term expenses. When
seeking financial independence, you need to establish a savings account for
emergency funds that can help you get out of any financial jam.
Saving for
Retirement
Saving for retirement is necessary for working Americans due to
the uncertainty of having financial assistance programs, such as Social
Security, available when it comes time to retire. Yet very few people are
setting up a retirement accounts or keeping up with their existing retirement
accounts through work, to ensure they have enough wealth for them to cover
their living expenses. Setting up a retirement savings plan earlier in life,
such as when obtaining your first job in your twenties, can ensure that you
have a large enough nest egg to cover all your expenses later on in life.
Obtaining financial wellness is a worthy goal. Targeting these
three key aspects in eliminating your credit card debts, opening up a savings
account, and getting a retirement account, can allow you to successfully build
your financial wealth.
We’re Here to Help!
Did you know we have a personal financial management tool
built into our online banking platform? Look
for My Budget Manager in online banking to help track your spending patterns,
set a budget and set goals.
If you have questions on budgeting or need assistance
getting the most out of your accounts, stop by or give us a call at 800-336-6309.
This article is for educational purposes only. Each
individual’s financial situation is unique and readers are encouraged to
contact the credit union when seeking financial advice on the products and
services discussed.
