Why all the talk about financial wellness?
Establish a foundation of sound financial knowledge and actions, and you can start achieving the long-term financial goals that lead to financial wellness.
Financial wellness and financial fitness are popular topics these days. So what does it mean to be financially well, and why is it important to you?
Financial fitness and financial wellness describe a state in which you feel in control of your finances. It’s important because many Americans do not feel in control of their finances. According to the 2020 Stress in America™ survey, nearly 2 in 3 adults (64%) say that money is a significant source of stress in their life, and around half of adults (52%) say they have experienced negative financial impacts due to the pandemic (American Psychological Association Stress in America: The State of Our Nation Oct. 2020).
The results aren’t surprising: Work and money-related worries consistently rank at the top of the survey. Financial stress affects health, productivity and relationships, and it can cause depression and anxiety. The only way to combat financial stress is to increase financial well-being.
Four elements of financial well-being include goals for both now and in the future.
- Controlling day-to-day and month-to-month finances and expenses
- Having capacity to absorb a financial shock
- Being on-track to meeting financial goals
- Having the financial flexibility to make choices to enjoy life
At any given time, some factors are within your control, and some are not. Your financial behavior is guided by your personality, attitudes, knowledge and skills, and the actions you take create your level of financial well-being.
Of course, you can do things to increase your financial wellness, like making a budget, saving money and reducing debt. Unfortunately, few people actually do these things. The personal savings rate is low, most households don’t have a formal budget and most people cannot cover an emergency expense over $1,000.
There’s no one-size-fits-all solution. But by keeping financial wellness top-of-mind, you can take actions to improve your financial stability, which can lead to less stress. Establish a foundation of sound financial knowledge and actions, and you can start achieving the long-term financial goals that lead to financial wellness.