5 Money Habits for Financial Wellness

Financial wellness is a general measure of how well you’re able to stay on top of your finances today and how confident you feel about your ability to meet your financial goals of tomorrow.

When it comes to improving your overall financial well-being, there are many approaches you could take. But a good fundamental place to start is by building smart money habits. Here are five to consider.

1. Write down your goals and make a plan

According to the Consumer Financial Protection Bureau, financial wellness is determined, in part, by the extent to which people feel that they are on track to meet their financial goals.

When it comes to setting goals, it’s important to write them down and be specific. This can help improve your chances of reaching them. By clearly spelling out what it is you actually want to achieve, you can then begin to put together a plan with timelines to help you move towards your goals in a tangible and measurable way.

This is important because without some type of roadmap to guide you, it can be easy to fall off track and lose motivation.

And a plan doesn’t have to be complicated. For example, if your goal is to build an emergency fund, your plan could start with something as basic as creating a budget to help you identify areas where they may be opportunities to save a little more each month. Any extra money you’re able to uncover in your budget can be reallocated toward your emergency fund.

2. Pay yourself first: Automate your savings

Saving as much and as often as you can is another way that could help improve your financial well-being. For instance, having a solid emergency fund can help provide some peace of mind when dealing with unexpected expenses.

One smart way to help boost your savings is to automate your finances. By putting your savings on autopilot, you won’t forget to pay yourself first whenever payday comes around. Also, by automatically transferring a portion of your paychecks to your savings account, it could help you stay on track for your money goals.

Don’t forget you can automate contributions to your retirement accounts as well. If you’re able to contribute consistently, you’ll be surprised at just how quickly you could grow your nest egg over time.

If you’re not sure how much you can afford to set aside each month for your goals, consider connecting with a financial advisor who can help you crunch the numbers and see what makes the most sense.

3. Be mindful of your spending

When it comes to financial wellness, it’s also a good idea to pay attention to how you spend money. Constant overspending, for example, can create stress and become a serious hurdle to reaching our financial goals.

That’s why having a budget and the discipline to stick to it each month can be a great way to help you stay on top of your money management.

If you’re looking to reduce spending, take a look at your monthly expenses and see if there are areas where you can make adjustments. For instance, are there certain recurring purchases or subscriptions you could do without?

And these adjustments don’t have to be big, dramatic cuts, nor do you have to take on a minimalist lifestyle (unless you want to). Remember, even small changes in your spending habits could make a big difference in your savings over time.

Keep in mind, too, that being mindful of your spending isn’t a one-and-done exercise, because your financial situation is usually never static. Your income and your needs could always change, so it’s a good idea to review and update your budget and spending habits on a regular basis.

4. Pay off credit card balances in full

Using credit responsibly is another important consideration in your journey towards financial wellness. While credit cards can be convenient, they can also cause a lot of headaches if you don’t pay your statement balances off in full and on time each month.

Debt from high-interest credit cards can impact your ability to build up your savings. The more you have to put towards debt or interest payments each month, the less you’re able to put towards your other financial goals.

Interest payments aren’t the only thing to be wary of. Making your payments on time is also critical. Late payments or defaults can really put a dent in your credit score, which could limit your ability to borrow at competitive rates down the road if you ever want to make a big purchase, like a home or take out a personal loan.

If you are in a tough spot in managing your debt, keep your head up. There are various ways to help get it under control and pay it off.

5. Get financially smart

The financial world comes with a lot of definitions, concepts and rules to wrap our heads around. And having a solid foundational knowledge of personal finance topics such as savings, investing, debt management and credit scores is essential. After all, financial literacy goes hand in hand with financial wellness.

Because in order to achieve your financial goals, whatever they may be, it's important to know how to make good financial decisions. But how can you decide what's right for you if you don't have an understanding of your options?

Let’s talk about investing as an example. Investing is an important component of personal finance, but to start investing (and do so with confidence), you have to first understand what you’re getting into.

For example, you may want to look into the different advantages and disadvantages to investing in things like stocks, ETFs and bonds. What are the potential rewards and risks? And what are the different roles they could play in your portfolio? Consider speaking with a financial advisor who can help you understand your options and how they may fit into your portfolio.

You’ll face a number of choices, too, when it comes to your savings. You may want to know the difference between putting your money into a high-yield savings account or a certificate of deposit account.

The bottom line: Having a knowledge of personal finance basics can help empower you to make money decisions that make the most sense for your financial goals. Having a strong money know–how could also give you the confidence to stay calm in uncertain or volatile times, helping you avoid making financial decisions out of fear or desperation. And as we mentioned earlier, if you have questions, don't hesitate to get in touch with a financial advisor.

The financial world is constantly changing because there’s constant innovation, so it’s a good idea to stay on top of your financial literacy. Check out our resources page where we provide explainers on various money topics.