10 Things you can do to improve your financial wellness
By ATB Financial 21 July 2021 3 min read
Taking your pulse or monitoring your blood pressure are a couple of ways to gauge your personal health, but did you know that you can also measure your financial wellness? Financial wellness is a holistic view of your attitude towards and knowledge about your finances, and your sense of freedom when it comes to your money and reaching your goals.
So how do you measure up? Here are 10 things you can do now to help improve your financial wellness.
Understand your financial situation
Are you familiar with basic financial concepts and principles? Do you know how much money you have in your day-to-day accounts and investments? Do you know how much debt you’re currently carrying, and the interest rate associated with that debt? Take a 360 degree look at your finances to know what you own, and what you owe.
Be honest with yourself
Do you regularly spend more money than you’re bringing in, or depend on using a number of credit cards to make ends meet every month? It’s important to take a realistic view of your finances and spending habits, so that you can address any trouble areas now.
Set some financial goals – for today and tomorrow
True financial wellness means enjoying life today while still planning for the future, and making sure all of it is within your means. Create some goals for yourself, which will motivate you to save some money. It could be planning a vacation, purchasing a new car, saving for your first home or putting away money for your retirement. Reflect on your goals, and make sure they are in line with your values—living the ‘Instagram life’ doesn’t mean you will be happy. Financial wellness is ensuring you’re reaching both your short and long-term goals.
Set a budget and stick with it
A good rule of thumb for personal budgeting is the 50/30/20 rule. Of the total money you earn, plan to allocate 50% to your needs: This could include your mortgage, utilities and groceries. Thirty percent of your budget should go towards your wants, which might be eating out, entertainment or shopping. Last, 20% of your budget should go towards an emergency fund and savings.
Go on a cash diet if necessary
Are you having a hard time figuring out where you’re spending your hard-earned dollars each month? Go on a cash diet, which will give you a strong sense of the value of money. Allocate your budget to different categories, then label envelopes for each of those categories. Add cash to the envelopes that aligns with your monthly budget. Go “all cash” for the month to see where you have money left over, and where you’ve ran out. You’ll have to decide if you’re going to “borrow” for other categories or defer a cost to the next month.
Consolidate your debt
Are you carrying debt across a number of credit cards or paying high interest loans? Consider consolidating your debt at a lower interest rate, then paying it down. Having a regular payment schedule will hold you accountable, while helping to reduce your debt more quickly.
Expect the unexpected: Build an emergency fund
Are you adequately prepared for an unanticipated situation? If you were to lose your job or had to replace a major appliance or vehicle, could you absorb the shock of that emergency? It’s recommended to have a minimum of three months of wages saved so that you feel prepared for anything life might throw your way.
Start early: The benefits of compound interest
The person who saves the most wins, right? Not so fast. Understanding the benefits of compound interest can help you get ahead when you’re saving for something big, like your retirement. Even if your initial contributions are small, starting your savings early can truly pay off.
Protect your future
With insurance, you can guard the investments you've made in your future against unforeseen circumstances. One in three people will have a disability event prior to retirement. Insurance can help you protect your ability to earn income and avoid dipping into your savings and investments in the event of an accident or illness.
Financial wellness is about enjoying life and feeling confident about your finances today, while saving for life’s big moments and fulfilling your goals tomorrow. If you’re still not feeling confident, you can arrange to meet with a banking or investing specialist to help take your next steps.