Financial wellness refers to your overall financial health. You can achieve financial wellness by making informed decisions as you manage your financial journey from college to first job and beyond. When you've achieved financial wellness in your personal finances, you'll have resources for financial emergencies. You'll have long-term financial goals to protect you and your loved ones. You'll have life insurance and disability insurance in place. You'll also have the know-how to work effectively with financial services providers.
Financial wellness matters in the way that any type of wellness or fitness matters: It improves your overall health and well-being. In the case of personal finance, wellness refers specifically to financial health and financial well-being in the present and in the future. Yet, financial wellness benefits aren't limited to financial goals and retirement plans.
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A healthy financial life contributes to your overall well-being by reducing stress levels and boosting your quality of life and mental health. It is for this reason that financial wellness matters.
Financial Wellness Is Part of Overall Wellness
The link between mental and physical health is well known and widely studied. As anyone who has improved their physical health knows, an improvement in mental health often follows suit.
In mental health circles, Swarbrick's 8 Dimensions Model is the concept of overall health and wellness. The eight interrelated dimensions are: emotional, financial, social, spiritual, occupational, physical, intellectual and environmental.
Financial wellness in this model is described as "satisfaction with current and future financial situations." In addition to the wellness correlation between these areas, it is also acknowledged that stress in one area can impact overall well-being and quality of life.
While financial wellness can make a positive impression on your life, the disruption caused by financial stress makes its own impact. In addition to the global stressors impacting many Americans at the start of 2022, personal finance issues are also taking a toll. Taking even small steps toward financial health can help lay the groundwork for the stability and flexibility that reduces financial stress.
Less Financial Stress, Less Life Stress
The Consumer Finance Protection Bureau (CFPB) names having control over daily and monthly expenses as one of the core definitions of financial well-being. It's also a significant perk of financial wellness since controlling your financial situation alleviates financial stress and provides peace of mind.
Money management takes work. Budgeting, tracking, saving, investing and monitoring your financial habits can be stressful on the front-end. But the short-term stressor of getting organized, finding a financial advisor and digging into financial planning result in the long-term benefit of improved management of your money.
The American Psychological Association's latest Stress in America survey reports that 65 percent of Americans are stressed about money – the highest percentage in seven years. Millennials were among the most financially stressed of the age groups surveyed, with 81 percent reporting housing costs and the economy as major stressors.
From heating costs and grocery bills to healthcare expenses and student loan debt, stress levels related to finances decrease if you have the money to pay your bills.
If you think of financial planning to improve your net worth as part of your overall wellness, the idea of budgeting can feel like part of your long-term self-care routine.
A healthy financial life contributes to your overall well-being by reducing stress levels and boosting quality of life and mental health.
More Financial Security, Fewer Surprises
Paying the bills is one way to have financial security, but true financial wellness means you can also tackle unexpected expenses without endangering your savings account or turning to credit cards.
The CFPB calls this aspect of financial wellness, "the capacity to absorb a financial shock." Financial planning and good budgeting allow you to have an emergency fund for any unexpected punches that might get thrown at you such as a costly health issue, job loss or major household repair. For instance, the pandemic was an eye-opening financial crisis for many Americans – and an incentive to rebuild emergency savings for the unforeseen.
Without financial wellness, a significant unexpected expense can cause you to withdraw from your retirement plan, drain your savings account or make other financial decisions you may regret later. In addition to the monetary loss and financial stress of a considerable expense, the inability to absorb it can cause emotional and physical strain.
Intentional, sound financial wellness means you are prepared to manage present expenses and face unexpected future events like inflation. It also allows you to plan for the future you want to have.
More Choices for Your Future
Planning for the future is another reason that financial wellness matters in your life. Intentional money management today allows you to reach your financial goals for the future.
Financial well-being and retirement planning advance your financial health, so you can feel confident in your financial situation when you stop working. Whether you are saving for homeownership or graduate school in the near future, or are saving ahead for a family college fund or life after retirement, being on track to reach those goals is financial wellness.
For some, retirement is about the dream of travel and adventure. For others, retirement savings is all about comfortable day-to-day living and the time and freedom to explore and enjoy interests without financial stress. Financial wellness allows you flexibility as you create plans for the future you.
Workplace Financial Wellness Programs
Many employers are establishing financial wellness programs as part of their employee benefits. The Global Financial Literacy Excellence Center (GFLEC) promotes holistic financial wellness programs as a way for employers to engage employees and encourage employee financial wellness. As the GFLEC states, "The workplace is a natural fit for financial wellness plans...(and create) a mutually beneficial environment of increased engagement and financial security."
Helping employees prepare for their future and giving them the financial education to build a secure future is an employee benefit with long-lasting value.
According to World at Work, 35 percent of all employees and 54 percent of millennials in the workforce do not fully understand their employee benefits. More than 65 percent of employees want more communication and education about their benefits.
A 2021 Bank of America study%20feel%20extremely%20responsible.) found that 95 percent of employers feel somewhat responsible for their employee's financial wellness, and 56 percent feel highly responsible. And according to Origin's State of Employee and Financial Health and Wealth Report, 93 percent of workers would like their employer's help to improve their financial health.
In response, many employers offer financial wellness benefits, financial education, training and webinars to help employees develop sound financial habits and control their financial future.
Finding Personal Financial Wellness Education
If you are looking for financial education outside the workplace or to supplement that education, there are numerous resources available to you.
LinkedIn learning has financial wellness courses and personal finance learning paths. The Consumer Finance Protection Bureau has a consumer education unit on financial wellness and a guide for employers that has tips and resources applicable to individuals, too.
Your local library, community college and many government resources, like the Financial Literacy & Education Resource Center, have educational materials and other tools for money management and planning.
You can also talk to a trusted financial advisor to develop a plan and get started. However you approach it, finding your way to financial wellness is an investment in your present life, as well as an important step toward lifelong financial health.
- Consumer Finance Protection Bureau: Consumer Tools: Financial Well-Being
- U.S. Department of Labor: 6 Ways to Increase Your Financial Well-being in the New Year
- Benefits.Gov: Start Your Path Toward Financial Wellness
- BMC Geriatrics: Effect of Financial Stress on Self-Reported Health and Quality of Life Among Older Adults in Five Developing Countries
- Substance Abuse and Mental Health Services Administration (SAMSA): Creating a Healthier Life: A Step-by-Step Guide to Wellness
- National Institutes of Health (NIH) and Canadian Veterinary Journal: Dimensions of wellness: Change your habits, change your life
- Drexel University Center from Hunger-Free Communities: Financial Health: The Root of Economic Security - Defining and Measuring a New Social Determinant of Health
- William & Mary: The Eight Dimensions of Wellness
- Aspen Institute: Exploring the Important Link Between Health and Wealth
- Society for Human Resource Management: Employers Double Down on Financial Wellness, but Approaches Differ
- American Society of Pension Professionals & Actuaries: Financial Wellness Seen Increasingly as Key Workplace Benefit
- American Psychological Association: Stress in America Survey
- Wiley Online Library: Midlife family financial strain, sense of control and pain in later years: An investigation of rural husbands and wives
- AARP: Plan for the Retirement You Want
- Global Financial Literacy Excellence Center (GFLEC): Workplace Financial Wellness