What is Financial Wellness?
Post updated with video accompaniment in January, 2023
Financial Wellness
What does financial wellness mean? Ellevest defines financial wellness as “the state of (money-related) well-being that’s achieved and maintained when you know what you have, you know where you’re headed, and you feel good about it.” In other words, understanding your financial picture, having enough financial literacy to create financial plans, and making sure that your emotions are balanced when you engage with money.
Financial stress is one of the leading causes of stress. With the pandemic, it’s gotten more stressful for Millennials and Gen Zers, with 72% and 68% endorsing financial stress in 2021. Whether you fall into one of those generations or not, working on reducing financial stress is important. As a financial therapist, I know firsthand how important it is to address the emotional side of money to help cultivate financial wellness.
5 Financial Wellness Tips
Financial wellness is more than just understanding money and setting financial goals, it’s about feeling good about your money. These five tips include financial literacy, but also encourage you to consider additional sources that help you have a balanced relationship with money.
Financial Wellness Tip 1: Learn About Money
Financial literacy, or learning about money, is an important step of having a healthy relationship with money. If you don’t know where to start with financial literacy, you aren’t alone. A 2018 survey found that only one-third of Americans could adequately answer basic financial literacy questions about interest rates, compound interest, and mortgages.
In my opinion, there are three main pillars of personal finance all people should know. First, make sure you are spending less than you earn. This is sometimes known as “budgeting” (though I prefer the term “spending plan”). Second, have a plan in place for short-term goals and savings like an emergency fund, travel, home improvements, and sinking funds. The third pillar is investing in your future. While this can include investing in retirement, it also means planning for your financial future long-term. This could include things like paying down debt, getting appropriate life insurance, saving for a child’s college fund, or getting a will and trust in place. For nine financial milestones for millennial couples, read this post or listen to this podcast episode here.
Financial Wellness Tip 2: Understand Your Financial Landscape
Learning about money is great, but understanding your financial landscape helps to put that financial knowledge into action. Understanding your financial situation helps you feel better about money. For many of my financial wellness coaching clients, they are anxious about their finances so they avoid them altogether. Once they look at their financial landscape, they can start to create a plan that works for them in managing their money.
Set aside time to review your finances, and make sure you can answer the following questions:
How much money do I earn each month?
How much are my monthly expenses?
How much debt do I owe?
What assets do I own (car, house, stocks)?
Am I contributing to a retirement account?
Financial Wellness Tip 3: Set Money Goals
Setting money goals is a great tip: but setting values-based money goals takes this tip even further. When it comes to setting money goals, first brainstorm all of the financial goals you’d like to achieve. Do you want to pay off your credit card debt? Purchase a car outright? Save up for a vacation? Great! Next is to add a timeline to those goals. E.g. “I want to pay off my credit card in eight months.” To really amp up the likelihood of achieving the money goals you set, see if they are in alignment with your values. For example “paying off credit card debt early is in alignment with my values of being intentional. A lot of past purchases that got me into credit card debt were impulse purchases that made me feel good in the moment, but I can’t say they were intentional.”
Financial Wellness Tip 4: Feel Good About Money
To feel good about money, you first have to understand how you currently feel about it. Do you think money is the root of all evil? Does money talk make you anxious? Are you more likely to schedule a colonoscopy than an appointment with your tax preparer?
Once you have an idea of how you currently feel about money (e.g. anxious, avoidant, fearful), ask yourself how you want to feel about money. For many of my financial wellness coaching clients, they say they want to feel calm, confident, or relaxed when they engage with their money.
Financial literacy can help with some of these feelings, but getting to the root of your money story is also important. A money story is what determines what we believe we are allowed to do with our money. E.g., how much you can save, spend, loan, lend, or earn.
Financial Wellness Tip 5: Find Similar People
Who you surround yourself with matters–especially when you are working on improving your financial wellness. Contrary to America’s “do it yourself” belief, 87% of employed folks endorse wanting additional help with their personal finances.
I love turning to the internet to find groups of people who are working on a similar financial goal. There are groups on Facebook, hashtags on Twitter, subreddits, and accounts on TikTok and Instagram that have different financial wellness focuses. Some focus on financial independence, others talk about money trauma, and some zoom in on student loans. Knowing you aren’t alone on your journey to financial wellness can provide normalization and validation of your feelings. Plus, when we work toward a goal with others working on a similar goal, we are more likely to achieve it.
Financial Wellness Coaching
Financial wellness is important because we know that most of our money decisions involve how we feel about money–in other words–A financial wellness coach, or a person who provides emotionally-focused financial coaching, can help bridge the gap between financial literacy and how you feel about money. While I provide emotionally-focused financial coaching to individuals, the waitlist to work with me is quite long. But, if you are in a relationship, I have a course called “Clarify Your Money: For Couples” that walks you through understanding your relationship with money so you can spend and save in alignment with your values. Learn more about the course below.