10 Tips for Improving Financial Wellness
According to the American Psychological Association, 64% of Americans find money to be a “somewhat or very significant source of stress.” If financial wellness were as easy as spending less money than you make and socking away 10% for retirement money, stress wouldn’t be affecting households to this degree. how to improve financial wellness can be overwhelming, and with a seemingly endless amount of information available online, you’ll likely feel no closer to an actionable solution. In an attempt to cut through the clutter, we created a list of how to improve financial wellness tips for employees. While not exhaustive, the following provides an excellent place for you and your employees to begin to improve financial wellness.
Where Are You on Your Financial Wellness Journey?
- Are you prepared in the event you suffer a reduction in your income? What if you lost a source of income?
- Do you know where you spend your hard-earned money?
- Have you considered how you were raised to think about money might affect your ability to reach your financial goals?
- Are you investing for the sake of investing without a goal in mind?
- Do you eliminate financial stress by planning ahead with your budget?
Your Money Line and our team of Financial Guides are here to help your most valuable resource (your employees) navigate their financial wellness topics and give you financial wellness examples. The aforementioned is the tip of the iceberg when it comes to the financial stressors of your employees. Knowing where to focus your attention regarding financial wellness is a massive part of the battle. For this reason, we’ve created a list of 10 financial wellness tips to kick off improving your relationship with money.
Here Are 10 Financial Wellness Tips to Get You Started
Learning how to improve financial well being isn’t a task that can be accomplished by reading a single article. You cannot reasonably expect to implement sweeping changes in bulk and stick to them. These tips will help you with places to begin and should be implemented in a staggered approach vs. all at once.
- 1. Automation, Automation, Automation
- Automation can be the key to reducing stress surrounding your budget, and automating your financial life yields success for several reasons. For starters, it’s practical. Your life is busy, and if you’re like most people, you have no desire to spend more time than required on your budget. By pre-planning your fixed/non-discretionary expenses, you’ll be able to take a much more passive approach to your monthly budget. In addition, if you automate your expenses, you’ll improve your money behavior. The fewer decisions you have to make about money, reduces your decision fatigue. It will take time to automate your spending plan, but this upfront work will yield long-term success.
- 2. Keep a close eye on your “budget busters”
- We all have vices when it comes to money. Groceries, dining out, and entertainment can capture more dollars than planned for most households. It’s no secret that the cost of goods is on the rise. If you weren’t monitoring your spending in these categories before, your spending might be up 10% even without changing your spending habits. If you take tip #1 (automation) to heart, it will be much easier to reign in this spending. After all of your non-discretionary expenses leave your account, the remaining dollars are what you have to spend on these categories.
- 3. Know your personality/money tendencies
- Not every strategy works for every person. Financial well-being does not happen in a vacuum. If your friend/relative/coworker uses one method, they might find it successful – this does not mean you need to adopt the same (or even a similar) approach. The best example of a strategy that doesn’t work for everyone is the idea of the 15-year vs. 30-year mortgage. I would prefer you take a 15 vs. a 30 year for many reasons. The most common rebuttal to this approach is, “why would I pay down a lower interest rate debt when I could invest the difference in mortgage payment to earn 8+%”. The math cannot be argued. Earning 8% on your money increases your net worth faster than paying off a 4% interest debt. However, in my anecdotal experience, I do not believe the average household can invest this difference consistently over the long term (and that’s ok!). In your heart of hearts, you know your tendencies concerning money. Manipulate yourself (in a healthy way) into making the best decisions for you and your personality.
- 4. Eliminate convenience spending
- I love Uber Eats as much as the next gal, but we have to stop having food delivered that we can pick up ourselves. Depending on your goals, there could be a seemingly endless list of expenses to eliminate here. Don’t let me lose you with this tip because I’m speaking to you as an equal. I am just as guilty as everyone else in this space. But if you’re trying to improve your financial wellness, eliminating convenience spending, including anything from nail appointments to lawn care to delivery service, can dramatically improve your financial well-being. This tip hinges on you using the lack of spending for something that moves your financial health forward, like paying down debt or building additional savings.
- 5. Plan for large expenses
- If you want to take a vacation, retire early, buy your next car in cash – whatever, you need to plan for these costs. Even if you have the margin (difference between your income and expenses) available to fund a large purchase, you must be deliberate about setting these funds aside. You might not always have the margin available to cash flow a large purchase. Setting aside the dollars needed will help build your saving muscles for a time when you might not find these expenses as easy to pay. Dollars unaccounted for tend to run away.
- 6. Recognize needs vs. wants
- Perhaps the most prominent item on the list, but it might be the most important. We’re not here to define needs and wants. In your house, having a cleaning service come in once a month might be a need. Adding this additional chore might be the very thing that pushes you over the edge. Others might feel that having a new car is a need because reliability is non-negotiable. Only you can decide what you need. Dollars must be allocated to your needs before your wants, and this should involve active vs. passive decision-making.
- 7. Don’t underestimate “miscellaneous” spending.
- It’s too easy to leave transactions uncategorized. Try to push transactions into a category instead of leaving them as “miscellaneous.” Entertainment expenses include (but are not limited to) fees for travel sports, subscriptions, and the deposit for the venue for your kids’ birthday party. Keep your miscellaneous spending to a few transactions. Ideally, miscellaneous spending should encompass no more than 3% of your take-home pay.
- 8. Use debit over credit
- There are multiple reasons why I would prefer you use a debit card over a credit card. For starters, psychological studies show we spend more money when we use credit cards (even if we’re earning cash back or “points”). In addition to spending more, it’s far easier to play mental accounting with your money when it’s not automatically removed from your checking account.
- 9. Know your “why.”
- Financial wellbeing isn’t something to be passionate about because it’s trendy. You need to know why you’re setting goals, what you hope to achieve, and why any of this is essential to you. Financial goals will allow you to prioritize change even though we all have a finite amount of financial resources. Establish goals, revisit them frequently, and adjust as necessary. Remember, if a goal isn’t serving your “why,” it might need adjusting.
- 10. Take stock of your investments.
- If you’re investing, it’s important to understand risk tolerance, time horizon, and some general behavioral finance concepts. Please don’t just open a non-qualified account and start buying crypto because you saw it on TikTok. Your time horizon (the time between now and when you’ll need the money) is the most important question to ask when deciding to invest. Most financial professionals agree that if you need the funds in twelve months or less, these dollars should not be taking any risk. This means your emergency fund should be in plain savings. You also need to know how comfortable you are taking financial risk. For the better part of the last decade and a half, it’s been pretty easy to stomach the bull market. However, not all investors are comfortable with the possibility of a significant market pullback. Update your risk tolerance questionnaire frequently!
Words of Encouragement for Your Journey
Your Money Line and our team of Financial Guides are here to serve your employees. Implementing any of the strategies mentioned above isn’t an easy task to take on solo. Our team is here to walk with your employees as they improve their financial well being. Click here to learn more about how Your Money Line serves your most valuable assets.