Bruce Helmer and Peg Webb
There are many definitions of financial wellness, but in our view, it refers to the degree to which you have achieved financial security and freedom of choice for the present and future in four dimensions: budgeting, saving, investing, and planning.
Concerns over financial security continue to dominate in the U.S. economy as workers struggle to recover from inflation stressors and market volatility. These were the top two financial wellness issues for 72% of workers, according to a 2023 survey of workers by Mercer, a global investment consulting firm.
As a result of this new way of looking at financial security, we’ve seen the definition of financial wellness expand to intersect with other areas of our lives, including general well-being (i.e., life satisfaction); psychological well-being (i.e., self-actualization); and ways to mitigate financial stresses. Everyday expenses, debt and rising health care costs continue to be top-of-mind issues, as is the longer-term, widespread concern of being able to retire. Just as important to financial wellness is our ability to sustain our physical well-being into old age through access to adequate health care, diet, and exercise. One cannot easily enjoy wealth if their health is suffering.
So there is a growing awareness of a subjective aspect of financial wellness that corresponds to our emotional and cognitive evaluation of our financial condition.
Financial wellness should not be focused exclusively on fixing negative behaviors. We’ve intentionally titled today’s article, “Practicing Financial Wellness,” because wellness is something that requires practice — repetitive reinforcement of many positive behaviors over time. There’s much that we all do that contributes to putting ourselves in control of our situation and a positive financial light.
To achieve financial wellness, try “practicing” some or all of the following activities. Try to do a little each day to maintain positive momentum, improve your ability to withstand financial hardships, and become more confident in your financial success.
Increase your financial literacy: Financial literacy encompasses a range of skills, including the ability to save and budget, an understanding of investing and debt management, and how to set and achieve financial goals. Read magazines, books, or blogs on financial matters, or sign up for an educational seminar or webinar. Your local public library can be an excellent resource. Listen to podcasts, and network with peers and colleagues. The important thing is to gear your learning to your experience and level. Our firm offers a wealth of resources on the Insights page of our website, wealthenhancement.com.
Create a Net Worth Statement: On one sheet of paper, write down all the assets you own (e.g., your house, stocks, bonds, cash, personal possessions) and subtract from that number everything you owe (e.g., outstanding mortgages, lines of credit, car or college loans, and so forth). This gives you a good picture of your household net worth, a very useful financial planning tool. Be sure to do it each year to see if your net worth is going up or down.
Track your spending: Even before you can set a budget, you have to have a clear idea about where your money goes each month. Use a notebook or a money tracking app, and record what you spend each day in both the “have to spend” and “nice to spend” categories. Often your bank or brokerage firm will have an app that pulls in all the various threads of your spending that can help you set a monthly budget.
Reduce unnecessary spending: If you’re not getting the most value out of the products and services you buy each week, maybe it’s time to cut back on eating out, exotic coffee, video streaming services, or cable services. But don’t cut out all the fun things in your life! Balance is key so that when you want to splurge on something you like, you won’t feel regret or guilt about it.
Increase retirement savings contributions: Consider increasing your contributions each year with every raise you receive, or at least enough to qualify for the employer match. The Tax Code allows you to make catch-up contributions to your 401(k) or IRA after age 50. That said, be careful that you’re not putting too much in these accounts that can whack you with a big tax bill down the road. It’s always a good idea to discuss with a financial adviser to see how boosting your savings applies to your situation. In addition, many employers are augmenting their employee benefits programs with employee discount programs, tuition assistance, or debt management services. It’s worth investigating what may be available to you.
Pay off bills: Reduce what you owe by paying off loans, credit cards, and other debts (especially those that carry high interest rates). I know it sounds nagging, but you should not take on more debt than you can comfortably handle. Shop around for the best deal before taking out a loan, and avoid carrying a balance on your credit cards, if possible.
Set up or add to an emergency fund: Squirrel away at least six months of living expenses, especially if your job is not secure, or there’s a risk of disability in your family, or if you have an unexpected car or home repair. You don’t need an instant emergency fund, day one — start small and build it up over time. And keep this emergency money in relatively safe, liquid funds. You can always transfer any excess emergency savings to your “long-term” investment account.
Check your credit report or score: Your rating influences your ability to qualify for credit, and the terms of that credit, so even if you always pay your bills on time, it’s important to check your scores periodically. Plus, with identity theft and credit card fraud cases spiking, you can’t be too careful. If you discover any errors, contact the rating agencies and challenge anything wrong. (You can check your credit score for free once a year through the major rating agencies; visit AnnualCreditReport.com or call 1-877-322-8228.)
Review your asset allocation: At least once a year, sit down with your adviser to determine whether your allocations still match your objectives. Be honest about your expectations, particularly when inflation is running high, and the markets have been volatile. Even if you’re managing your own money, you need to do a self-evaluation about whether your allocation (and risk budget) is still appropriate.
Work with a financial adviser: Achieving financial wellness is a complex undertaking, even more so if you own lots of assets and/or income sources, have a child with special needs, or have a complex tax situation. Having an adviser in your corner can be a big help in these situations. And even if you like to manage most of your financial decisions, having someone to challenge your assumptions and provide a second opinion can be invaluable.
This list may look daunting, but you don’t have to do everything at once. Pick one or two financial wellness goals and work on them at your own pace. Celebrate victories and milestones, no matter how seemingly small — and pay attention to your overall physical health. Soon you’ll develop confidence in your ability to achieve and enjoy the financial success you deserve
Your Money: Is your asset allocation applicable to today’s markets?
Your Money: How the financial adviser’s role has evolved
Your Money: Women and wealth: a values-based approach to planning
Your Money: Don’t treat your 401(k) like an ATM
Your Money: Train your brain to make better money decisions
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Bruce Helmer and Peg Webb are financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on WCCO 830 AM on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com. Securities offered through LPL Financial, member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL Financial.
