Feeling financially unwell can affect more than just consumers’ wallets.
In a study from the American Psychological Association, nearly 72 percent of American adults reported feeling stressed about money at least some of the time, and nearly a quarter said they experienced “extreme stress” about their financial situation in the past month.
Stress at that level isn’t healthy. Chronic stress can cause headaches, weight gain, and even heart disease, according to the Mayo Clinic. The American Psychological Association also pointed out research that shows stress associated with financial problems strains cognitive abilities, meaning the person feeling financially unwell is more likely to make decisions that continue to lead them into unfavorable financial situations.
But there’s a silver lining. Regardless of income or credit score, people who seek training and become financially literate tend to rate their financial well-being higher than those who don’t. Here are some tips to help improve your financial wellness score.
1. Create a plan.
Decide where you want your finances to take you and compare that to your current financial situation. Write down all the steps to reach your financial goal and assign a time period to achieve each one. Reward yourself periodically as you come closer to your goal.
2. Automate savings.
It’s a lot easier to resist spending money if you never see it hit your checking account. Set up an automatic transfer each paycheck from your checking account to savings. Experts suggest aiming to set away six months’ worth of income for emergencies. It’s also wise to put about 10 percent of your income toward retirement.
3. Carry cash.
Swiping a credit or debit card can make spending money feel a little too easy. Pulling out dollars for each purchase forces you to be more aware of how much you’re spending. Take out only a set amount of money each week to help stay within your budget and cut down on impulsive spending.
4. Improve your credit score.
A poor credit score will hold you back financially, even if you’ve cultivated healthy budgeting and spending skills. Pay off lingering debts and be sure to pay off all new expenses promptly to improve your credit score. You may want to consider setting up automated bill pay, so you don’t accidentally miss payment dates.
5. Build financial literacy.
You can’t be financially well if you don’t know how to be. Consider utilizing podcasts, books, articles, and shows that teach financial concepts. For a more hands-on approach, research financial literacy events or classes hosted by credit unions or other financial institutions in your area. Several credit unions in Ohio have certified financial counselors who are trained specifically to help improve financial wellness.
FAQs
Financial confidence comes from understanding how budgeting, saving, investing, risk and debt management work. These pillars develop good money habits and build a strong foundation for a stable future.
What are the five pillars of financial wellness? ›
Financial confidence comes from understanding how budgeting, saving, investing, risk and debt management work. These pillars develop good money habits and build a strong foundation for a stable future.
What are the 4 keys to financial health? ›
Many financial experts agree that financial health includes four key components: Spend, Save, Borrow, and Plan. It is crucial that you actively work on improving the health of each one.
What is one way in which you can enhance financial wellness? ›
The most fundamental steps toward financial wellness include establishing a budget, managing cash flow and debt, building your emergency savings, and putting some automation in place with your savings.
What are the 5 pillars of wisdom and wellness? ›
These five pillars are hydration, nutrition, sleep hygiene, exercise, and mindfulness. Good science supports the wisdom of each of these pillars.
How can you create positive financial well-being? ›
Strategies for financial wellness include setting financial goals, building an emergency fund, having insurance coverage, improving credit scores, planning for retirement, and staying informed about personal finance.
How do you build healthy financial habits? ›
Save early and consistently, and create a budget to manage spending effectively. Pay off high-interest debts first and consider consolidation or refinancing for better terms. Regularly check accounts, apply the 24-hour rule to avoid impulse buys, and use expert resources to learn how to be better with money.
What are the 4 pillars of financial wellbeing? ›
To achieve financial wellness, you need to practice the four pillars of financial wellness: budgeting, saving, investing, and planning. By following these principles and practices, you can improve your financial well-being and enjoy a better quality of life.
What are the 4 pillars of financial services? ›
Regardless of income or wealth, number of investments, or amount of credit card debt, everyone's financial state fits into a common, fundamental framework, that we call the Four Pillars of Personal Finance. Everyone has four basic components in their financial structure: assets, debts, income, and expenses.
What are the 4 C's of financial management? ›
Character, capital, capacity, and collateral – purpose isn't tied entirely to any one of the four Cs of credit worthiness. If your business is lacking in one of the Cs, it doesn't mean it has a weak purpose, and vice versa. Instead, the four categories come together to constitute purpose.
By managing your spending and savings in a way that matches your short- and long-term goals, you'll be in a better position to experience financial wellness. Basically, the idea is to spend less than you bring in each month, so you can build your liquidity. The ultimate challenge, then, is to live within your means.
What is a healthy habit in financial wellness? ›
Get into the habit of dividing up your expenses into needs, wants and savings or debts. If it's appropriate, aim to spend 50% of your income after tax on needs, 30% on wants and 20% on savings and debts each month.
What are the financial pillars of wellbeing? ›
To achieve financial wellness, you need to practice the four pillars of financial wellness: budgeting, saving, investing, and planning. By following these principles and practices, you can improve your financial well-being and enjoy a better quality of life.
What are the five pillars of financial freedom? ›
The five pillars of financial planning—investments, income planning, insurance, tax planning, and estate planning— are a simple but comprehensive approach to financial planning.
What are the five pillars of sustainable finance? ›
Pillar 1: Definition: Use of proceeds. Pillar 2: Selection: Process for project evaluation. Pillar 3: Traceability: Management of proceeds. Pillar 4: Transparency: Monitoring and reporting.
