In Search of Financial Wellness?
Financial wellness is fast becoming the latest buzzword as soaring inflation and interest rates pile the pressure on Canadians. There is a strong connection between mental health and financial health, and financial stress is taking a heavy toll. So, what exactly does it mean to be “financially well”?
Financial wellness is described as a state of well-being where an individual or a household has achieved financial stability and is able to meet their current and future financial obligations without undue stress. Financial wellness is not about being rich, having a certain amount of net worth, nor achieving a specific financial goal. Rather, it is about having a sense of security and confidence in your financial capability and being able to manage financial issues, challenges and opportunities as they arise over time.
Financial wellbeing is a function of many different factors. Income is obviously a critical element, but it also depends heavily on how well we are able to manage our money. These tasks include budgeting, managing debt, and investing and planning our retirement. The degree to which we are able to handle these tasks successfully depends on our level of personal financial literacy and our ability to make informed decisions, solve financial problems, and manage financial risk.
The heightened stress and anxiety cause by poor financial wellness has significant effects on many aspects of our life including poor job performance and relationship issues.
How do you measure financial wellness?
Financial wellness can be measured in a number of ways, but it is often a feeling rather than some sort of tangible number. A financial health assessment is a comprehensive evaluation that involves reviewing income, expenses, debt, savings, investments, insurance coverage, and other financial assets and liabilities. It identifies areas of strength and weakness and provide insights into how to improve overall financial well-being.
A financial stress tests involve evaluating an individual’s or household’s ability to withstand financial shocks or unexpected events, such as a job loss or medical emergency. Financial stress tests can help identify potential vulnerabilities in one’s financial situation and provide insights into how to build financial resilience.
Financial behavior analysis involves examining an individual’s or household’s financial behavior and decision-making processes. It can help identify patterns of behavior that may be contributing to financial stress or instability, such as overspending or not saving enough.
Overall, measuring financial wellness is a complex process that requires taking into account multiple factors and indicators. Different methods may be appropriate for different individuals or households, depending on their specific financial circumstances and goals.
How can I improve my financial wellness?
There are plenty of options for improving your financial wellness and most of them revolve around bettering your financial literacy skills to effectively tackle expenses, use credit wisely, manage debt, save money, and build long-term wealth and security through investing. Working with a financial coach or financial planner can also provide the knowledge and support needed to achieve your financial goals.
In addition to individual actions, there are also broader solutions that can support financial wellness at the societal level. These may include policies that promote income equality, affordable housing, and access to financial services, as well as financial education in schools and employee financial wellness programs.
2023 is shaping up to be another tough year financially for Canadians and financial wellness will continue to be elusive, especially if your financial literacy is lacking. The good news is there are a lot of resources available and many of them are free or low-cost. The largest hurdle for most of us is willpower and maintaining our motivation — achieving financial wellness is not a sprint. It can be a time-consuming, slow process and you may not see the results from your efforts until many months or many years down the road!
Published by DLC Marketing Team