Financial wellness refers to the monetary situation of an individual and whether their financial affairs are in order. In instances where an individual is considered financially healthy, they will have each of their monetary affairs in order. This state has many layers, including how much money an individual is saving, their retirement fund, and both variable and fixed costs. Variable costs include those that change month on month depending on consumption (e.g., electric bills, water bills, etc.) Fixed costs are those that remain the same each month, such as rent/mortgage payments, insurance, and mobile plans. Ultimately, financial wellness means that you feel secure about your financial future.
Calculate Your Net Worth
In order to improve financial wellness, you first need to understand what you’re bringing in and what’s going out. You’ll need to list your assets like properties, cars, stocks, jewelry pieces, and anything else of value. Then, you’ll need to identify each of your outgoings, including rent/mortgage payments, loans, credit card debts, bills, etc. Lastly, you can subtract your outgoings from your assets to identify your net worth.
The figure that you reach from this calculation will represent your current financial standing; however, this figure may fluctuate month on month for a multitude of reasons. As a rule of thumb, you might want to calculate your net worth on an annual basis, so that you’re kept relatively up to date about your financial standing.
Create an Achievable Budget
Budgets are handy tools that allow you to track your income and expenses alike. Therefore, this can aid you in reducing spending and prioritizing what needs to be paid for and when. Similarly, a budget can help you save for future goals and make wiser decisions when it comes to spending. On top of this, it gives you a means of accounting for emergencies, which otherwise may present monetary struggle.
Budgets can be tricky to form and adhere to, but don’t panic. Whether you’re in Melbourne or Sevenoaks, accountants aren’t the only ones who are capable of building an appropriate budget. You just have to be disciplined and try not to deviate from your budget unnecessarily.
Prioritize Needs Over Wants
Something that lands a lot of people in financial trouble is spending on things that they want and can’t necessarily afford. Your needs are things that you’re unable to live without such as shelter, food, healthcare, reasonable clothes, etc. Of course, it’s not reasonable to expect someone to always go without something that brings them pleasure, whether that be the occasional take-out or new top. However, these should be occasional treats and overindulgence in such can land people in financial trouble. If you can’t afford these luxuries, you should make sure that you prioritize your needs over them.
Build an Emergency Fund
Unforeseen emergencies can really land you in some bother when it comes to finances. Although you can’t predict emergencies, you should set money aside, if you can, should they arise. You need to be sure that these savings are kept within an accessible bank account so that you can readily withdraw from when need be. Unforeseen emergencies include accidents, pest control, plumbing problems, death, car repairs, fires, health scares, and job loss. If you can manage to put money aside for these circumstances, you should factor this into your budget so that you feel secure.
If you’re left with extra income at the end of the month, it’s a good idea to place these in a savings account with a good interest. This way, your money will be making money, helping you maintain security.