Financial wellbeing can be defined as a state where you have control over your day-to-day finances, have the ability to absorb any financial shock, meet your goals, and have the financial freedom that allows you to enjoy life. Basically, you are in a position where you are financially secure and your means are enough to meet your needs, with extra tucked away. Financial wellbeing can look different for everyone based on their individual needs. To understand exactly what financial wellbeing is, and why is financial wellbeing important for you, we have prepared answers to a few frequently asked questions:
1. Why is financial wellbeing important?
The importance of financial wellbeing cannot be emphasised enough, as being financially stable is the key to living life comfortably. The link between financial wellbeing and mental health is undeniable, as having the freedom to do whatever you want (within your means) gives you a sense of balance – in a way, money does buy happiness. The sense of security that comes with the knowledge that you are able to pay off your bills, put away a little stash for a rainy day, and still have enough to enjoy yourself not only results in less stress; it also extends to your physical wellbeing. Besides, it is always great to know that you have enough put away to deal with emergencies as they come up.
2. What does financial wellbeing mean to me?
Financial wellbeing, being a part of personal finance, is personal. It means different things to different people. Some people may feel secure with a rented roof over their heads, while others may want to buy a house in their name to achieve that sense of security. And these priorities are dynamic, thus they may change over time. Here are some things to consider when you are evaluating your financial wellbeing:
- Analyze your current lifestyle
Take a look at your current spending patterns. Is this something that you want to keep up? Are there any lifestyle changes that you are planning? What are the financial decisions you need to make if you are planning a change?
- List down goals and dreamsWhat are your plans for the future? What would they cost? How do you need to manage your finances in order to achieve these goals?
- Review core values
What values do you intend to live by? How does your financial situation support these values? How do you ensure continued financial stability to live by these values?
3. How to improve my financial wellbeing?
Once you have decided what it means to you personally, it would be easier to develop a financial wellbeing strategy. Bear in mind that when it comes to financial wellbeing tips, the rule of thumb is that there is no rule of thumb. However, there are a few ways that could get you started on your way to achieve and maintain your personal financial wellbeing:
Stick to a budget
Set a budget, stick to it and be strict about it. Many young people tend to be declared bankrupt because the sense of freedom when they start earning gives them a false sense of security, and thus, they overspend. With proper budgeting, you will be able to monitor your cashflow and cut back on unnecessary spending, and tuck more away into your rainy-day funds.
- Establish an emergency savings fundWhen an emergency strikes, a financially stable person will be able to absorb the financial shock it brings. And that is exactly why you need to have an emergency money stash. Having one allows you to manage emergency expenses without financially draining yourself.
- Spend less than what you makeSpending less than what you make doesn’t necessarily mean that you need to live the life of a frugal ascetic. You obviously can have fun, but it pays to bear in mind not to go overboard and spend too much. One way to achieve this would be setting aside a “fun” budget to do with as you like, and not spend more than that.
- Be careful with debt
When you are in debt, you are basically borrowing against your income. While it may seem satisfying to whip out your credit card for every little thing, be mindful not to max them out and get yourself into deeper debt. Only swipe for what you can pay back, whether in instalments or at one go.
- InvestYou don’t have to be Jeffrey Bezos to invest. There are many affordable investment opportunities, you just must know where to look.
- MindsetGetting into a habit requires constant practice and discipline. Train yourself to get into a financially healthy mindset, and once you get into the habit, the rest of the way should be a breeze.
Figuring out your financial wellbeing can have a positive effect on your overall wellbeing and should not be overlooked. Your financial wellbeing is also your mental and physical wellbeing and is worth putting time and effort into. To learn more about growing financially steady, check out our blog for more insightful articles!
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