Financial Wellness

Financial wellness is a state of being in which you can meet current and future financial obligations, feel secure in your financial future and make choices that let you enjoy life. Financial wellness can also reduce preoccupation with money needs and improve your mental and physical well-being.

What Is Financial Wellness?

Financial wellness – sometimes referred to as financial well-being – means the ability to have a healthy financial life.

It is being in a situation where you control your day-to-day or month-to-month finances while having the freedom and security to deal with financial emergencies and still stay on track to meet your long-term financial goals.

The U.S. Consumer Financial Protection Bureau (CFPB) identifies four elements that define financial wellness or well-being.

4 Elements of financial wellness table
Source: Consumer Financial Protection Bureau

Financial wellness depends heavily on changing your behavior to improve your financial life.

In most cases, the first steps require you to stabilize your day-to-day financial situation to create a solid foundation on which you can build a financial future.

Steps to Achieving Financial Wellness
  • Developing a plan to live within your financial means
  • Creating an emergency cash reserve (and creating – in advance – your household definition of “emergency”)
  • Eliminating debt – particularly your credit card and other consumer debt
  • Creating and sticking to a budget that earmarks money for savings and investments
  • Building your financial literacy – understanding basics of debt, investing, risk, retirement planning and taxes
  • Applying your preparations and financial literacy toward a long-term financial plan for your future
Source: Foundation for Financial Wellness

Financial wellness allows you to focus less on day-to-day money worries, which is a critical step toward creating a successful and sustainable retirement planning strategy.

You can find financial wellness programs within your workplace, professional financial services companies or non-profit organizations.

Financial Wellness vs. Financial Literacy

Financial wellness is different from financial literacy.

  • Financial literacy is possessing the skills and knowledge to make informed decisions and effective choices with your financial resources.
  • Financial wellness is the peace of mind that comes with the financial security and freedom of choice to maintain your financial resources now and in the future – including through financial emergencies.

Financial wellness describes the state of your financial health. It also describes the way your finances affect your physical, mental and social health.

Personal Financial Wellness

About 125 million Americans – 54 percent – say they live paycheck-to-paycheck. That includes 40 percent of people making more than $100,000 a year, according to a 2021 survey by LendingClub Bank.

Anywhere from 12 to 33 percent report trouble paying their bills.

This cycle can make it difficult to understand your current financial situation and make it seemingly impossible to make any long-term financial plans. It also takes a toll on your mental, emotional and physical health.

Did You Know?
Preoccupation with money problems can cause a cognitive decline of 13 IQ points – about the same as losing a full night’s sleep – according to a 2013 study published in the journal Science.

Your financial wellness goals can be very personal and likely change as your priorities change, and you age toward retirement.

Top 3 financial goals by generation table
Source: Bank of America 2020 Workplace Benefits Report

Talking with a professional, licensed financial advisor – especially one who specializes in financial wellness – can help get you started.

Employee Financial Wellness

You may be able to access financial wellness resources through your job.

The number of employer-sponsored financial wellness programs increased in the 2010s. By 2019, 53 percent of companies offered financial wellness programs, compared to just 24 percent four years earlier, according to a survey by Bank of America.

Also, more employers now believe they have an “extreme responsibility” for their employees’ financial wellness – more than a four-fold increase between 2013 and 2020.

Employers feel responsible for workers financial wellness
Source: Bank of America

Employers are partly driven toward improving workers’ financial wellness because it also improves their bottom line.
Other surveys suggest that financial stress makes workers less productive.

Impact of financial stress on workers
Source: Foundation for Financial Wellness

At the same time that businesses are expanding access to financial wellness programs, the number of individual workers who rate their own financial wellness as good or excellent is declining.

Ask your human resources department or Employee Assistance Program (EAP) about financial wellness resources that may be available to you. If your company doesn’t offer a financial wellness program, ask it to consider adding one. Companies are increasingly seeing a business benefit in the idea.

Last Modified: September 7, 2021

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