According to the U.S. Financial Health Pulse 2019 Trends Report, only 29% of Americans consider themselves financially healthy. This means that the vast majority of Americans aren't prepared for a recession or for any financial crisis that will come their way. This also means that most Americans lack the foundation in which to build a healthy, happy, successful life.
Everyone wants financial wellness. No one wants to find themselves struggling to make ends meet and deep in debt. While there are plenty of organizations (including the government) through which you can apply for financial assistance, that's not a position you want yourself to be in. But what does it take to become financially healthy? Below, we'll discuss the definition of financial wellness, what you can do to achieve such a state, as well as programs that can enable you to reach your goal.
Various experts define financial wellness in different ways. Some believe that financial wellness is simply an ability to manage one's finances confidently to meet their needs and business goals. Others view it more holistically. It is the overall health of your finances and the way it relates to all aspects of your life.
Financial wellness is not just about being able to pay your bills, getting debt-free, and saving for retirement. Though these are good indicators of financial wellness. What most experts agree on is that it involves behavior, knowledge, attitude, and level of contentment. Simply put, real financial wellness consists of building a strong financial foundation, creating a plan to achieve your business goals, and feeling satisfied with your current financial situation.
Before we get into the details of how you can achieve financial wellness, we must differentiate financial literacy from financial stability. Both of these are factors that can affect your economic well-being. But there's a big difference between the two.
You shouldn't underestimate the importance of financial literacy, even though it is the easiest of the two to achieve. It's all about arming yourself with the knowledge, understanding, and skills that will make you capable of effectively and efficiently managing your finances. It's the ability to know and understand how money works, what you need to do to make it, manage it, and grow it. Take note that being financially literate does not mean that you're financially stable. It just means you know how to become economically stable, and you have the skills to achieve it.
Financial stability refers to your financial status. It means you're comfortable enough financially that you aren't worried about paying bills, meeting obligations, and handling unexpected expenses. You are in a place where you don't need to apply for personal loans or use your credit card if you lose your job or suddenly have medical bills to pay. To put things more simply, financial literacy is the first step towards financial wellness. Financial stability is the next stage.
Employee financial wellness programs are the new additions to the benefits package that companies offer nowadays. A good retirement plan and comprehensive health insurance are no longer enough for employees of this generation. If you want happy, healthy employees and a boost in productivity, providing your employees with the knowledge and skills to achieve financial well-being is essential.
So, what exactly are employee financial wellness programs? Generally, these are programs provided by companies to help their employees learn how they can improve their economic well-being. The applications can include financial counseling, money management, and 401k education. The objective of these programs is to reduce employee anxiety regarding their finances and to help them practice healthier financial behaviors.
There are different kinds of financial wellness programs that companies can utilize to help improve their employees' overall economic well-being. Below are some examples:
One way to help educate employees about managing their finances is by inviting experts to speak to them at a workshop in the office. Topics can range from budget planning to reducing debt and saving for retirement.
Another way to provide a financial wellness program is to partner with a company that specializes in financial planning. For example, you can partner with a company that offers financial counseling and other services that your employees can avail of at a discount.
There are plenty of software solutions that offer various financial services such as personal and household budgeting, student personal loan repayment management, emergency and short-term savings, financial goal setting, consumer credit building, and economic crisis management. Some tools provide personalized coaching and financial advice.
The value that a good financial wellness program brings is felt across an entire organization. For employees, such a plan enables them to handle their finances better. It allows them to be more effective in managing their money. As a result, employees become happier, less stressed about money. Because they aren't worried about their finances, employees are more productive. They're also less prone to sickness. Moreover, they're less likely to take out loans against their 401(k)s.
Employers also benefit when they provide this type of benefit to their people: employee engagement and retention increases. There will be fewer requests for payroll advances. There will also be higher participation in 401(k)s and drops in wage garnishments.
Based on the definition of financial wellness, achieving it will require one to be financially literate, financially stable, and economically content. So, the next question is, how does one make it?
If you work in a company that offers financial wellness programs, then good for you! But for individuals who don't have this particular benefit, there are steps that you can take to improve your financial well-being.
The most crucial step you need to take on your road to financial stability is creating a budget. Money management knows how much money you have coming in, how much money you have gone out, and where exactly that money is going. To create a budget, you need first to take a look at your monthly income and expenses. If your costs cost more than what you make, then you need to either lessen your costs or increase your monthly income. The point of your budget is to help you live within your means and enable you to put away money for a rainy day. It should also allow you to keep yourself out of debt. Once you have a budget set, the next thing you'll need is the discipline to follow it. Watch what you spend. Don't make purchases that you have not accounted for in your budget. Keep yourself on track.
One thing you can be sure of in life, emergencies will always pop up now and then. Car trouble, medical expenses, house repair, etc. All of these are inevitable. And if you live from paycheck to paycheck, you won't be able to handle a financial emergency when it happens. To avoid struggling through these times, you'll need a healthy emergency fund. The general rule of thumb is that you should have at least six months' worth of income tucked away for a rainy day. Start small. Automate your savings to make it easier. And stop yourself from spending your savings on unnecessary expenses.
Zero debt. Most individuals think it's an impossible dream. But to achieve financial wellness, you need to have zero liability. You wouldn't be able to feel content in your financial situation if you had creditors asking you for their money. So, pay off your debts. You can start by paying off credit card debt, particularly those with the highest interest. You can also opt to consolidate your mortgage, which is a good option for individuals who have less-than-stellar credit and high consumer debt. For example, you can apply for a personal loan for bad credit and use the money to pay off more expensive debt. Not only does this simplify your finances, but may also lowers the amount of money you're paying in interest.
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