Essential Tips To Take Charge of Your Financial Wellness

Written by Hazel Secco, CFP®, CDFA®

Our attitude and mindset regarding the management of our financial lives can significantly influence how we save, spend, and invest. At times, we may acknowledge areas in our financial lives that could be enhanced but struggle to enact change. Financial wellness encompasses your attitude toward managing financial responsibilities and your satisfaction with your current and future financial situation.

Are there aspects of your financial life that you know need improvement? Do you have a strategy in place to address those areas? Many people recognize areas where they can enhance their financial wellness, but taking action toward significant change requires time and effort. Changing behavior and mindset is a gradual process that necessitates dedication and persistence.

In this blog post, I would like to share some tips you can follow to enhance your financial wellness.

1. Know Your Spending.

It might seem simple, but regardless of income level, managing expenses is often the most challenging aspect of comprehensive financial planning with clients. Understanding where money is being spent, especially in households with multiple family members, can be difficult. With the prevalence of credit card usage, it’s easy to lose track of spending and not feel the impact of money leaving your pocket. One approach is to use a single credit card for all expenses, allowing for better tracking and organization. However, if there’s concern about overspending, using the credit card sparingly and relying more on a checking account may be a better option. Some individuals opt for using cash to limit spending, although this approach can be cumbersome and prone to mismanagement.

If you’re already using a budgeting app or financial planning software, chances are it includes a feature to consolidate all your spending in one place. Having all your transactions easily accessible in a single location can significantly simplify managing your expenses. If you’re unsure whether this feature is available in your current tool, check its settings or consult with a financial professional you trust to provide access or guidance on consolidating your finances.

2. Know Your Priorities.

Money plays a crucial role in life, as it is essential for meeting basic necessities. However, managing money becomes complex due to the abundance of discretionary expenses that can bring joy and happiness. It’s vital to distinguish between necessary and discretionary spending to establish boundaries on discretionary expenditures each month. While it’s important to indulge in enjoyable activities and experiences, it’s equally crucial to set limits to prevent overspending. For those who struggle to maintain responsible credit card habits, imposing spending limits can be beneficial. Additionally, prioritizing one or two financial goals each month, whether they are essential tasks or discretionary treats, helps maintain financial wellness. Striking a balance between discretionary spending and setting limits is essential for preserving financial stability and peace of mind.

3. Know What You Have.

I find that one of the most challenging aspects of working with clients is helping them realize the full extent of their financial picture. Often, clients believe they have a handle on their finances, only to discover additional assets or accounts they were unaware of. It’s common to uncover forgotten or overlooked accounts, such as old 401(k) plans from previous employers that were never rolled over into an IRA. Tracking down these accounts can be complicated, especially if the client has changed jobs multiple times and is unsure where their former employers’ 401(k) plans are located.

That’s why I always recommend a “financial organization” process. Taking the time to review and organize all financial accounts and assets can provide clarity and help clients optimize their financial resources. Understanding where each asset is located and its tax implications is essential for effective financial management. If clients feel overwhelmed or uncertain, seeking professional assistance can be immensely beneficial.

It’s important to remember that it’s okay not to have all the answers about their finances. Just as I don’t know everything about other professions like being a doctor or engineer, clients shouldn’t feel bad about getting help to navigate their financial landscape. Asking for assistance is a proactive step towards achieving financial clarity and peace of mind.

4. Know Good Debt vs. Bad Debt.

People often debate the concept of “good debt” versus “bad debt,” seeking a simple way to navigate the complexities of financial decision-making. This categorization serves as a quick reference point to determine what actions to take or avoid. However, I believe that within each category, there exist both positive and negative aspects.

In my view, mortgages can exemplify this duality. Mortgages can be considered either good or bad depending on various factors. For instance, a mortgage that contributes to the growth of your overall net worth is generally viewed as a good debt. This occurs when the property appreciates in value over time, and the interest rate on the mortgage is favorable. Essentially, you are investing in an asset that increases in value, and the mortgage payments serve as a form of enforced savings.

Conversely, a mortgage can become a bad debt if the property fails to appreciate in value or if the associated costs, such as maintenance, outweigh any potential benefits. Additionally, the purpose of the mortgage—whether for investment or primary residence—can influence its classification as good or bad debt. Ultimately, the suitability of a mortgage depends on individual circumstances, including affordability and long-term plans for occupancy.

In summary, the distinction between good and bad debt is not always clear-cut and can vary based on perspectives and situational factors. It’s essential to carefully evaluate each financial decision and consider its potential implications before proceeding.

5. Know Your Money Script.

Understanding your money script is crucial for achieving overall financial wellness. Your money script, shaped by upbringing, environment, and culture, influences your financial decision-making process. By identifying and understanding your money script, you can become more aware of your tendencies and biases when making financial decisions.

Financial decisions are often influenced by emotions and personal preferences, making it challenging to remain conscious and practical. While we may strive for rationality in decisions like stock picking or market investments, these choices are often driven by consumer sentiment and emotion. Recognizing the emotional aspect of financial decision-making allows for greater clarity and insight into our behaviors.

I offer clients the opportunity to take a money script test, providing them with a deeper understanding of their financial mindset. While some may believe that money should be approached in a purely rational manner, the reality is that financial decisions are inherently intertwined with our emotions and mindset. By acknowledging and understanding these factors, individuals can make more informed and mindful financial choices.

Let’s wrap up.

In conclusion, we’ve covered a range of topics related to money and financial wellness, along with valuable tips to enhance your financial wellbeing. Now, it’s time to reflect on your own financial situation. Are you feeling financially well?

Financial wellness may seem abstract, but it’s akin to other areas of wellness such as mental or physical wellness. It’s not solely about earning more money. Financial wellness involves the ability to identify what truly matters to you and those around you, and charting a path to reach those goals while understanding your current financial position. In truth, it’s not solely about increasing income. Some individuals earn substantial incomes but may struggle with excessive spending due to stress from work, family, or mental health issues. Moreover, focusing solely on saving can lead to feelings of insecurity and unhappiness about overall financial well-being. As someone who has experienced these challenges firsthand, I understand the importance of achieving balance and peace of mind in all aspects of financial wellness.

Taking the time and effort to dig deeply into why certain financial decisions matter and how they align with your values can provide clarity on the true meaning of money and how it serves you.

To gain further insight into your financial wellness, I encourage you to take a quick quiz to receive a financial wellbeing score. This quiz will provide you with valuable feedback and help you identify areas where you can further improve your financial health. Click here to take the quiz and discover how financially well you are!