When it comes to improving the quality of your life, focusing on your financial wellness — living within your means, creating safety nets, and developing financial goals — pays off. Improving your financial health can empower you to achieve other money-related dreams. For example, with a good understanding of your income, expenses, savings, and debt, you can plan to save for a down payment on a house. Or by creating an emergency fund, you can ensure that an unexpected expense doesn’t lead to a bigger problem.

In addition, working on your financial wellness is proven to improve mental health. Multiple studies reveal the connection between financial worries and anxiety, depression, sleep problems, and more. Gaining control of your finances goes a long way toward reducing all of those.

So how can you get your financial wellness on track?  This five-step guide can help you assess your financial health, and then take action to improve it.

1. Pay down debt

A couple sits on the floor sharing a laptop while they look up ways to pay down debt

If you’re dealing with debt, you’re not alone. Many Americans have some form of debt. This includes student loans, mortgages, car loans, and credit cards. But debt doesn’t have to be alarming. And you can often work low-interest debt such as a home mortgage or federal student loans into a reasonable budget.

Higher-interest revolving debt may cause additional stress if you’re also facing late payment fees. A first step toward improving your financial health is to create a plan to pay down your higher-interest debt. There are multiple strategies for paying off debt, and you’ll want to explore the ones that work best for you. For instance, using a personal loan to consolidate your debt may lower your overall interest rate and simplify your monthly payments.

Learn more about:

2. Budget for short-term financial goals

Two men discuss budgeting for their financial goals.

Budgets do more than track your spending. They offer a roadmap for what’s financially possible. Start with a solid understanding of where your money goes each month by comparing your income to your spending. You may find you’re spending more than you think on daily coffee runs, monthly subscriptions, or transportation-related expenses.

Look for ways to save, beginning with painless cuts. Maybe you could negotiate a better rate on your car insurance, brew your own coffee, or cancel subscriptions you don’t use. Then you can earmark your savings for short-term goals like planning a vacation or saving for a destination wedding.

Learn more about:

3. Plan for bigger expenses 

Everyone’s financial life includes large expenses, such as medical procedures, planned leaves of absence from a job or a home remodel. By preparing for these bigger expenses, you can work them into your financial life rather than having them disrupt it.

Think about what big bills might be coming your way and explore responsible ways to fund your needs and your dreams. A personal loan, for example, might help you complete a much-awaited home remodel. A small side gig can provide extra funds that make it easier for a parent to stay home with children. And a health savings account can accelerate your savings for a planned medical procedure. The key is anticipating the expense and creating a proactive strategy for tackling it.

Learn more about:

4. Create an emergency fund

Part of financial wellness is the ability to manage unexpected financial hits. These include car repairs, sudden home repairs, or dental emergencies. Creating financial safety nets ensures that surprise events don’t become financial catastrophes.

For example, an emergency fund can provide cover for smaller emergencies. Various insurance products like major medical, auto, home, and life insurance can all offer protection against unexpected financial events.

Learn more about:

5. Save for the future

Once you’ve determined your budget, planned for large expenses, and established safety nets, you’re ready to save for your long-term financial goals. This is a last and critical piece of financial wellness; regular savings over years can help prepare for retirement or pay for your children’s higher education.

Take advantage of employer-sponsored retirement savings, and save enough to earn matching funds, if they’re offered. Accounts such as 401(k) plans for retirement and 529 plans for college savings, allow you to save pre-tax dollars, which also helps accelerate your savings.    

Learn more about:

It’s time to get financially well

There’s no better time than now to start a journey toward financial wellness. If you follow these five steps you may feel more in control of your finances, reduce stress and anxiety, and make real progress toward your financial goals.

Is debt consolidation part of your financial wellness plan? Now that you’ve taken these steps, you can evaluate the potential savings of consolidating your higher-interest debt with this debt consolidation calculator. 

Published November 18, 2022