Why all the talk about financial wellness?
Article published in Northampton Living
(December 2020)
Terms like “Financial wellness” and “financial fitness” are thrown around a lot these days. So what does it mean to be financially well, and why is it important?
These terms describe a state in which you feel in control of your finances, a state many Americans are unfamiliar with. A 2017 Stress in America Survey reported that 62% of Americans said that their financial situation was a significant source of stress in their lives (American Psychological Association Stress in America: The State of Our Nation Nov. 2017).
The results aren’t surprising: Work and money-related worries consistently rank at the top of the survey. Financial stress affects productivity, relationships, and health in the form of 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 present and future.
• Controlling day-to-day and month-to-month finances and expenses
• Having capacity to absorb a financial shock
• Being on-track to meet 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, attitude, 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. By keeping financial wellness in mind, you can take actions to improve your financial stability, which can reduce 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.