The Importance of Financial Wellness
Financial wellness, like physical wellness, isn’t something you should ignore. Instead, it's a critical concept for anyone who wants to be knowledgeable and confident about their finances, and in fact, financial wellness is so important that more than half1 of employers now offer financial wellness programs to their workers.
So, what is financial wellness and why is it so important? Keep reading for an overview of this concept.
What Is Financial Wellness?
Financial wellness refers to having a happy, healthy, and relatively stress-free relationship with your finances. Typically, people who have financial wellness have the following four elements in place:
- Their income covers their expenses and allows them to stay on top of their debt repayments.
- They have savings for emergencies or financial upsets such as critical home repairs, unexpected medical bills, or job loss.
- They are saving and working toward long-term financial goals.
- They have the freedom to make choices that allow them to enjoy their lives.
Which Factors Determine Your Financial Wellness?
The amount of money you earn plays a significant role in your ability to create a plan for financial wellness, but this is certainly not the only factor you need to take into account. You should also consider how you manage your money.
For instance, someone could make a million dollars per year but feel stressed due to overspending, not having a savings account, or being in an excessive amount of debt. In contrast, another person could earn $100,000 a year and have financial wellness due to managing their money carefully.
How Do You Manage Financial Wellness?
If you are having trouble with financial wellness, look for tools and education to help you develop a healthier relationship with your finances. Depending on your situation, this may involve attending financial seminars, using budgeting apps, or working with a financial professional.
Ultimately, to help you pursue financial wellness, you should consider bringing the following elements together:
- Earning a sustainable income
- Getting control over your day-to-day and month-to-month expenses
- Creating and maintaining effective money management strategies
- Setting up a savings account for financial emergencies
- Outlining long-term financial goals
- Saving for your long-term financial goals
Why Is Financial Wellness Important?
Financial wellness is critical for all people because it can help lower your stress levels. Stress related to money can affect every aspect of your life. Your personal and professional productivity could potentially suffer due to financial worry. In fact, this is one of the key reasons that so many employers offer financial wellness programs. Employers are well aware of how stress reduces productivity, and recognize that helping their employees learn about financial wellness can help strengthen the business's bottom line.
Financial wellness can help you in the long run. If you're focused on financial wellness, you're also working on your long-term goals, and as a result, you are likely to enjoy both your present and your future more.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult a financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
Sources
1. https://www.forbes.com/sites/johnwasik/2019/10/11/why-you-need-financial-wellness/?sh=48e0d59e55d6
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