Money is one of the things that dictates how well we can live our life. Although it’s such a big part of how we live, not many people learn how to increase their financial wellness. This can be a problem, as many of us end up struggling with finances, at least at some point in our lives. The issue is most pressing amongst young people, as they take on many responsibilities simultaneously.
No one prepares us to go through big changes like that. Not even older people can avoid all financial risks. As the economy fluctuates and the economic environment changes, it can be hard to keep up. The best thing you can do if you want to take care of your finances is to incorporate responsible habits into your life. If no one teaches you, you have the responsibility to learn what you need to know.
Instead of waiting around, hoping things will improve, you need to take matters into your own hands. From investing to learning how to save money, many tricks will help you achieve financial wellness.
What Is Financial Wellness?
Financial wellness is more commonly known as financial well-being (FWB). It assesses the quality of life in economics. In the 1970s, when the term first emerged, it was used by American economists to analyze the American population. Other states began using it as an index of well-being.
Financial security is the primary goal of financial well-being. It’s not limited to baseline security, though. Through financial wellness, you can save quite a bit of money. So, you can apply the habits you learn at any stage of your life. Financial wellness is flexible enough to allow you to tailor it to your needs. What it aims to do is teach people financial literacy, which is something our society lacks.
Many people don’t even know what they need to do to get a loan, or how inflation works. Even though these concepts are necessary, they are still not common knowledge. Financial wellness isn’t limited to individual use. Governments and economic organizations use it to determine which social security programs they should implement.
For example, the Consumer Financial Protection Bureau is a US governmental agency tasked with protecting consumers against abuses from financial institutions. One of the things they support is financial wellness, even using FWB to evaluate the population’s needs. Such an agency also exists in Canada. Even businesses use this index to ensure their employees are sufficiently remunerated. You might not have heard of the term before, but economists do use it.
Of course, many other indexes and economic models need to be used in the latter instances. But an, individual can adopt the teachings of economic wellness if they want to improve their finances. It would help if you relied on luck or a financial planner without financial literacy to be secure. The sooner you learn to take matters into your own hands, the safer you’ll be.
3 Habits to Increase Financial Wellness
Try adopting these money habits to grow more secure.
1. Becoming Financially Literate
Before actively improving your finances, you need to take the time to become financially literate. As crazy as it might sound, most people have no clue what most economic terms mean. Just because you’ve heard the word “recession” on the news doesn’t mean you understand.
In many cases, people get the wrong definitions of economic concepts. If you ask a person on the street what equity is, they’ll probably have no clue what you’re talking about. But financial illiteracy is so bad that some people believe taxation is theft. Or that inflation happens because central banks randomly decide to make more money.
That’s not even the worst part, though. Even though taxes, inflation, and things like that affect individuals, they’re not exactly something we can change. And we are not in charge of deciding when inflation rises or such. But we are in charge of taking out loans or getting insurance. These things are necessary, but many people don’t even know how to fill out the forms for a loan.
You can’t expect to achieve financial wellness if you don’t know how basic economic instruments work. You need to open your laptop and start doing some research. For example, people often skip getting their house insured. But they don’t realize that paying a small monthly premium could save you if your house burns down.
Look into your service provider’s charge and what those charges are for. Understand how a credit score works. If you feel lost, you can even watch videos explaining the basics of economics and financial literacy.
2. Learn How to Save
A big part of financial wellness is learning to be responsible with your money. More specifically, learning to get the best deals at the lowest price so you can put some money aside. Even if you can barely make ends meet, try to put some loose change in a piggy bank. You might be surprised how much of a difference that can make.
Now, saving money sounds nice, but how can you do it? One of the easiest ways is to start budgeting. You’ll find many things you buy that you don’t need. When you budget, you force yourself to stay within the limit. Instead of buying new clothes, you could start buying from second hands to stay within the budget. Or you could begin cooking instead of ordering takeout.
Besides budgeting, it’s imperative to learn to substitute. For example, don’t buy name-brand dish sponges. Any brand will do just fine. Start making more coffee at home so you don’t have to buy Starbucks daily. Another tip is to check all your utility services and see which costs you can cut. You’ll often find yourself paying for features you don’t need. Why pay for cable if you only use Netflix? Identify all useless expenses and eliminate them.
Ultimately, it’s more than nothing if you manage to put one dollar per month in a savings account. Progressively, you’ll start saving more and more. Coupled with the interest rate you’ll gain, you’ll find that you’ll have increased your financial wellness after a couple of years.
3. Invest and Plan For the Future
In the economic field, investing goes hand in hand with planning for the future. That’s because, contrary to popular belief, investing doesn’t just mean buying stock or crypto. Still, investing is one of the most complex concepts to grasp, and many people have an innate high degree of risk aversion. This means they won’t take a gamble even if the winnings are a hefty sum. Professional investing is based on complex economic models and a lot of predictions.
You need to research and understand trends and be familiar with what you are trading. Investing in stocks is not the same as investing in bonds or Forex. But a few categories of investments are less risky.
Still, one of the best investments you can make is not even one that generates immediate cash flows. Investing in your retirement is one of the most brilliant things you can do. And the sooner you start, the better it’ll be. This is especially important in places where you don’t have a guaranteed pension from the state. In some locations, part of your taxes automatically goes into a pension fund.
In that case, you are responsible for knowing which fund handles your pension. On the other hand, your fund might be worse than other funds out there, so you might need to switch. But in a few states, such as the US, not everyone is eligible for a public pension. In most cases, you need to make a monthly payment from your salary to a private pension fund to ensure you can retire.
No matter your situation, it would help if you stay informed. Even if your state provides a pension, you still might benefit from depositing money in a private fund. That’s not the only way in which you can invest in your future. Of course, you need to make sure you get an education and work towards having a career. But you also need to make sure you can have a passive income. One of the safest ways is to save enough money to buy a property and rent it.
The initial sum invested will be significant, but rents are high enough to cover the costs in a few years. After that, everything you get is a profit. Investing in securities such as treasury bonds is also an excellent way to earn a safe, passive income. As long as you make sure you research and plan, you’ll be on your way to achieving financial wellness.
Final Thoughts on Some Habits to Increase Financial Wellness
Like it or not, we need to take care of finances. Unless you decide to live in the mountains away from society, you’ll always have to deal with money. Naturally, as long as you deal with them, you’ll want to strive toward financial wellness. For humans to feel well-off, they need to feel a sense of financial security.
They need to know that they won’t end up on the street if something unexpected happens. So, it would help if you tried to learn some healthy habits. The first thing you must do is learn financial literacy. The more terms you understand, the easier it’ll be to follow economic news and keep up to date. Not only that, but you’ll learn how to manage specific responsibilities, like taking care of your credit score. It would help if you also started saving money.
It doesn’t matter if you only save a few dollars at first. Once it becomes a habit, your savings will grow exponentially. Lastly, it would help if you learned to invest in yourself and things that can generate a passive income. Sure, it might be hard at first. You might fail or need to be on a tight budget. But, if you keep up with these habits, you’ll reach financial wellness sooner than you think.