Financial wellness is not just about being aware of thoughts. Thoughts need to turn into action.
When you understand what you need to do to make yourself financially well and your actions align with those goals, financial health is the result.
The next step to moving towards financial wellness is to identify the actions needed to be financially healthy.
Financial health typically means three things:
- the ability to manage day-to-day finances
- the ability to absorb an unplanned, costly expense
- staying on track to meet your financial goals
So, what are the actions that will get you there? Here are a few to get you started:
Spend less than you earn.
This is the cornerstone for your financial wellness. You won’t be able to save money for future expenses or to get out of debt if you spend all of your available income. Pare down expenses to be less than you make, create a budget, and stick to it.
Pay your bills on time.
This will keep your credit score on the upswing, keep your budget on track and keep you from wasting needed dollars on interest and late fees.
Build an emergency fund.
Keep some cash in the bank for those unplanned, costly expenses. Otherwise, a financial setback could have devastating effects. It’s also a good way to build the habit of saving money as you build your cash reserve.
Keep debt sustainable.
Apply for additional credit only if you need it and don’t take on more debt than you can handle. A “bigger than you need” home isn’t worth the ruined credit and financial stress it will create if you can’t really afford it.
Stay on track with retirement savings or other financial goals.
Whether you are saving to buy a house or hope to retire early, keep your long-term goals in sight and set aside money to achieve them.
Avoid (or pay down) high-rate consumer debt.
A mortgage or a student load are considered “good” debt because a home may increase in value and an education may increase your income. Credit card debt leaves you paying high interest rates to buy things that may no longer exist while you are still paying them off.
Keep tabs on your credit score.
A good credit score is a safety net should you ever need to borrow money. A bad score can cost you money in the form of higher insurance premiums, utility deposits, or interest rates.
Have enough insurance.
Protect yourself against possible financial calamities like large medical bills, lawsuits, natural disasters or death by making sure you have the appropriate insurance policies in place for your specific needs.
These items cover the basics. Each person’s situation is unique so it’s possible not all of these will apply to you.
Take the time to explore what actions you need to take to manage your day-to-day finances, be able to absorb unexpected expenses, stay on track to reach your financial goals and create your own financial health.