Building Financial Wellness in the New Year
Financial wellness is having financial security and freedom. It can also be described as a state of being able to meet current financial needs, feel secure about the future, and make wise choices that allow you to enjoy your life more fully. Whether you’re creating a budget, paying off debt, or building savings, taking small steps can lead to significant improvements in your financial well-being.
This is important because it can help reduce financial stress, improve stability and confidence, and also encourage proactive steps in one’s finances. It’s an approach to money management that enables greater life enjoyment and financial freedom.
Here are a few steps you can take to get started on your financial wellness journey.
Creating a Budget
Tracking your income and expenses to help understand where your money is going is one of the most beneficial ways to achieve financial wellness. Tracking your spending creates a clear picture of where your money is going. This enables you to make more informed spending decisions and helps you avoid overspending.
One example is the 50/30/20 rule, which is a simple budgeting framework.
This framework suggests using 50% of your income for needs, 30% for wants, and 20% for savings and paying off debts. You can learn more about it on our blog, How to Budget with the 50/30/20 Rule.
Another way to start planning a budget is the envelope method. This is when you would divide cash into physical envelopes labeled for specific spending categories, such as groceries, gas, and fun.
To learn more about this method, check out our blog post, Mastering the Envelope Budgeting Method.
Build an Emergency Fund
Having a savings account to fall back on can help boost your financial wellness. Setting aside a small percentage of your monthly income helps build a financial safety net.
Building an emergency fund is important because it helps you avoid high-interest debt. When unexpected expenses happen, being able to fall back on an emergency fund rather than a credit card or loan helps you avoid a possible debt cycle.
It can also serve as a buffer, allowing you to tackle sudden and unexpected costs without exhausting your monthly budget or a regular savings account. Remember to try and contribute additional funds whenever you receive extra income, like a tax return or a bonus from work. Though it may not be the most exciting way to use some of your money, it is something that you may thank yourself for in the future if the funds end up being needed.
Reducing Debt
Although this may seem daunting at first, taking small steps to help reduce and pay off debt can greatly improve your financial wellness. You can start by assessing your debt and income and then creating a budget and payment strategy.
There are many different methods to start paying off, two of the most common being the avalanche method and the snowball method. To learn more about these methods and paying off debt, read our Strategies For Paying Off Debt blog.
Financial wellness is a journey, not just a one-time goal. The beginning of the new year is a perfect time to take that first step. Whether you’re creating a budget, building an emergency fund, or taking small steps to reduce debt, these changes can lead to greater confidence and long-term stability.
Prioritizing your financial well-being can help you reduce stress, achieve greater confidence, and gain peace of mind. You can find more financial tips on our blog page.