January is Financial Wellness Month, which means it’s a good time to plan and update your financial strategy.
Now is a great time to connect with your financial professional to discuss your financial situation and aspirations for the future. You should also assess if your financial strategy needs any adjustments or changes based on your lifestyle or any changes to your goals or circumstances.
Defining Financial Wellness
The first thing to do is define what “financial wellness” means for you. This varies drastically from person to person. It is informed by who you are, where you come from, and your experiences with money. A person who has had serious financial troubles in their life might have different expectations than a person who has enjoyed relative financial stability.
How, then, is “financial wellness” defined? First, ask yourself what you need to feel secure, financially speaking. Here are some questions to consider:
- How much should you have saved by retirement?
- Have you saved enough so far?
- How much income should you be bringing in each month?
- Do you have money left over at the end of each month?
- Would things be simpler if you carried less debt? Is there certain debt that should be prioritized for payoff and certain debt that makes sense in your long-term financial plan?
- How fluid is your cash flow when it comes to expenses that are not urgent (taking your family out to dinner or on a small trip) versus larger financial goals (such as buying a new kitchen appliance)?
- Finally, and perhaps most importantly, will you be able to retire (become financially independent) at your target age?
Financial Wellness Goals
Thinking about financial wellness is often a matter of setting goals for what you can accomplish now and what you can work on to make it a part of your larger financial strategy. For now, consider taking these actions:
- Have a values-based conversation with the adult decision makers in your household. This could be your spouse, domestic partner, or a family member. Make sure that the non-essential things you are spending money on line up with your commitments to meeting your financial needs. This is not a “stop getting lattes” conversation; it is a “are we spending money on the things that matter to us?” conversation.
- Consider automating payments, especially for regular items, including student loans, credit cards, and other installment payments.
- Create an emergency fund reflecting 3–6 months of household expenses to establish a stable foundation going forward (this means taking a comprehensive inventory of your spending, which can typically only be done by tracking expenses consistently and accurately or by hiring a financial planner to analyze your spending for you). If that seems too ambitious, build the fund a month at a time until you reach your goal.
- Make regular contributions to your retirement accounts. Take advantage of any matching contributions you might get from your employer, and make sure you aren’t leaving any money on the table by at least getting the full employer match.
- Set long-term financial goals. If you are thinking of buying a house, for instance, let that guide your overall financial strategy, which might mean temporarily reducing spending while you save for the down payment.
- Is becoming totally debt free an achievable goal? It can be if you make it a priority. That said, being totally debt free can be a difficult task for most households. For that reason, it may be better for you to focus on your other goals first and make debt freedom a target for a later date: for example, being debt free by retirement.
These are, of course, not hard and fast rules. As mentioned above, every individual has their own specific definition of financial wellness. Some of these examples might feel like a long reach. Others, you might already be practicing. The good news is that with careful practice and judicious scrutiny, many people can gain a feeling of satisfaction and even pleasure from maintaining financial wellness.Having your financial strategy in place can mean not only a great deal to you in the long term but may also provide you some comfort in the short term. Schedule a time to discuss this with your financial planner.
This content is developed from sources believed to be providing accurate information, and provided by Strategic Financial Planning, Inc. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered legal, investment, or tax advice.