Financial Literacy Month in full effect! Based on research data by the Financial Industry Regulatory Authority, 63% of Americans are financially illiterate. They lack the basic skills to reconcile their bank accounts, pay their bills on time, pay off debt and plan for the future. Financial wellness is caring for the wellbeing of your personal finances. Being financially literate makes it much easier to do so. I’m sharing 12 steps to improve your financial wellness, but before I do, let’s talk about what it means to be financially literate.
Breaking Down Financial Literacy
According to Investopedia, “Financial literacy is the education and understanding of various financial areas including topics related to managing personal finance, money and investing.” This basically means that people who are financially literate are able to make appropriate decisions about personal finances.
These decisions include, but are not limited to budgeting, investing, retirement planning and saving. Put another way, financial literacy allows people to know and understand what it takes to maintain their finances
How does one achieve financial literacy?
“The main steps to achieving financial literacy include learning the skills to create a budget, the ability to track spending, learning the techniques to pay off debt and effectively planning for retirement,” also shared by Investopedia.
These things can be achieved by working with a financial educator, coach or advisor, by consuming personal finance content (books, podcasts, blogs), and by taking training or classes. When you improve your financial literacy, your financial wellbeing improves too!
12 Steps to Improve Your Financial Wellness
#1 – Mentally Prepare and Commit
When you make the decision to commit to your financial wellness, you have to mentally prepare for the work that lies ahead. Just like learning any type of new skill, positive changes won’t happen overnight. There will be weeks and months of seeing little progress, but you have to be willing to keep fighting through. If you’re ready to improve your financial wellness, get tough mentally and commit to it!
#2 – Assess Your Situation
If you don’t know where you are, you don’t know the best way to move forward. This applies to your finances as well! You need to understand where you currently stand with your finances. Are you in debt? How much? Do you have any assets or savings? What is your net worth?
These are just some of the questions you’ll want to ask as you assess your situation and get a clearer picture of what your overall financial look like at this time.
#3 – Determine Your Priorities
When you know where you currently stand, you have a better idea of what you need to focus on. There are certain things everyone should be putting money towards. Things like paying off debt, saving for emergencies, ensuring your kid’s college education is being saved for. Think about the most important things that need to be accomplished first. Those are your priorities. In case you aren’t sure where to start, paying off debt and having an emergency fund are good go-tos.
#4 – Create a Budget Around the Priorities
Now that you know your priorities, you can create a budget that helps you take care of them. This is a crucial step to improving your financial wellness. A budget is a necessity for anyone who wants to successfully manage their money. However, a budget that factors in your priorities is a game-changer!
#5 – Find Ways to Cut Back
If you want to improve your financial wellness, you must be able to sacrifice and cut back, especially things you don’t really need. As you are creating your budget, be realistic about what areas can be cut back or cut out completely. Remember, this is just a temporary option until you get where you want to go in your finances.
#6 – Find Ways to Make More
Not only does sacrificing play a role in improving your financial wellness, but the opportunity to make more money does too! At the end of the day, you can only cut back your spending and expenses so much.
At some point in time, there’s going to come a time where the only solution is to make more money. Getting creative and not being afraid to hustle means you can always make more money. Think about things you can start doing to bring in more money ASAP. This will help you reach your goals faster, and get you closer to outstanding financial wellness.
#7 – Start Saving for Retirement
One of the best things you can do for yourself is start saving for retirement. There is no better return on your investment than saving for retirement as early as possible. Thanks to compounding interest, it grows substantially. If you want to improve your financial wellness, start by saving for retirement NOW. If your employer doesn’t offer a 401k plan, seek out an IRA.
#8 – Check Your Credit Reports
Identity theft is real and happens all of the time. If you aren’t keeping an eye on your credit reports, people could be using your information to obtain credit. This could mean terrible credit scores. Everyone gets one free credit report pull from each of the 3 bureaus every year. You absolutely want to take advantage of this.
#9 – Track Your Progress
There’s more to budgeting and money management than doing the same thing over and over. You want to make sure you are actually improving month over month. The only way you’ll be able to see this is if you track your progress. Keep records of your spending, balances, and debt payments. Every month, do a quick glance to make sure you are making progress. Slow progress is better than no progress at all!
#10 – Learn More about Personal Finance
If you want to improve your financial wellbeing, you should be willing to learn new things, especially about personal finance. There are so many books, blogs, magazines and audiobooks out there that can teach you things you didn’t know. More importantly, they can teach you things you didn’t know but never quite understood how to implement. Being open to knowledge and seeking it out can yield tremendous results over time.
#11 – Set Short- and Long-Term Goals
While life isn’t always about “leveling up”, there is something to be said about setting goals and achieving them. When you have something to work towards, you make the right decisions to help you get closer to what you’re working for. Setting short- and long-term financial goals can improve your financial wellness because it gives you something to work towards.
In addition to having something to focus on, having goals keeps you motivated. You want to reach the goal, therefore you are more likely to say “no” to things that will slow your progress or keep you away from the goal.
#12 – Stay Consistent
Rounding out our list, if you want to improve your financial wellness, you have to stay consistent. Financial freedom is not an overnight journey, and as I mentioned earlier, you may not see results right away. Don’t let that stop you! Stay consistent with your efforts and you will see the fruits of your labor.
Related: What it Means to Be Financially Literate
Your financial wellbeing is something you can constantly work on and improve. Thank goodness! Do the right things with your money, and the right things will happen in your life. Are you currently working towards financial wellness? What tips can you share about your experience? Post a comment below to share with the CGS community!
2 thoughts on “12 Steps to Improve Your Financial Wellness”
As usual, very helpful tips that can be implemented during any stage of one’s financial journey. Even though I’m starting to get a better handle on my finances it’s still very important for me to stay focused by continuting to read, learn and “check-in” with an expert. Your articles keep me on track and constantly working towards my goals.
Thank you so much for the feedback Candace! So happy to keep you on track (virtually)! Keep working towards your financial success – you will get there!