In my opinion, financial wellness is achieved through proactivity—the ability to take charge of your financial situation by adopting the necessary habits and behaviours that lead to positive outcomes. Just like maintaining a healthy lifestyle through a balanced, healthy diet, exercise, and sleep, implementing consistent financial wellness habits can protect you from financial disruptions and help you build a stable future.
Here are four of my recommendations:
Assess Your Financial Position:
To secure financial wellness, start by gaining a clear understanding of your financial position. It’s easy to overestimate what you can comfortably afford, especially when distinguishing between needs and wants. Before making any significant purchases, honestly assess whether you can afford them without compromising your financial stability. Categorize your needs and wants separately to prioritize essential expenses over non-essential ones. For instance, paying rent takes precedence over buying a new car if your current vehicle serves its purpose effectively.
Create a Realistic Budget:
A key aspect of financial wellness is developing a realistic budget based on your current income and expenses. Avoid making plans that rely on money yet to be received, as this can lead to short-term disruptions and financial stress. Only include funds that are already in your possession when creating your budget. This practice will prevent you from relying on uncertain income sources and reduce the risk of defaulting on payments.
Set Up Barriers for Accessibility:
While saving a portion of your earnings is vital, it’s crucial to implement barriers to prevent impulsive spending of emergency funds. Consider keeping some of your savings in an account that isn’t easily accessible. This “roadblock” approach provides a moment of reflection before making any hasty financial decisions. When accessing your emergency fund requires some effort, you’re more likely to think twice before using it for non-essential expenses.
Optimize Your Money’s Potential:
Make your money work for you by seeking out opportunities that offer even small returns. Just as Tesco’s slogan says, “Every little helps.” Instead of letting your money sit idle in a regular savings account, explore options that can generate some interest or returns, no matter how modest they may seem. This could involve moving your savings to an account with higher interest rates or exploring low-risk investment options. By making your money a revolving fund, you can potentially increase its value over time and contribute to your financial wellness.
Securing financial wellness involves taking a proactive approach to manage your finances. By being honest about your financial position, creating a realistic budget, implementing barriers for accessing emergency funds, and optimizing your money’s potential, you can protect yourself from financial disruptions and build a more stable and prosperous future. Remember that even small steps towards financial wellness can make a significant difference in the long run.