11 Steps to Financial Wellness

                                        

January is Financial Wellness Month. Financial Wellness is the overall financial status or state of an individual that involves a combination of the mental and physical aspects of money. Financial wellness is based on a strong financial mindset that determine an individual’s thoughts, actions, behaviors and attitudes regarding money. Financial wellness involves understanding your financial situation and having the desire, skills and knowledge to adequately handle risks and changes to your financial situation. Financial wellness involves knowing how much money you earn, spend and owe at any given time and developing a plan for the future. Financial wellness can also be called financial security, financial freedom, financial independence or financial stability.

Financial wellness ensures that you don’t have to stress or worry about your finances and involves developing a financial plan on your own or by hiring a financial expert that will help you to achieve your financial goals and consistently live within your means. Financial wellness means having a consistent cash flow to pay for all of your needs and wants and being able to achieve the dreams and lifestyle your desire in a balance manner.

According to the Federal Reserve, 43% of Americans live above their means. Many Americans live paycheck to paycheck and are living in either low-income or middle-income households – some just one paycheck away from being homeless. If they lose their jobs, they have no backup plan, no savings and no safety net to help them through a financial crisis. Many school systems do not teach financial literacy. This statistics show the importance of financial wellness in America. To successfully navigate through life Americans must make the right financial decisions that will affect their future and their future generations.

Here are some questions that will help you determine if you possess financial wellness. If you answer "no" to 5 or more questions, you need to gain knowledge about financial literacy and change your mindset – your thoughts about money.

1. Do you have a bank account?
2. Do you frequently overdraw your bank account?
3. Do you have an emergency fund? Do you have at least 9-12 months of savings in an emergency fund?
4. Do you cash your checks at a check cashing store or liquor store?
5. Do you pay bills late?
6. Do you have a retirement account?
7. Do you know what your current credit score is?
8. Do you reconcile your purchases and financial transactions against your bank and financial statements?
9. Do you have a budget?
10. Do you know how much debt you owe?
11. Do you know your net worth?
12. Do you owe taxes or have you owed taxes in the past?
13. Do you have adequate insurance?
14. Do you have an estate plan?

Here are 11 effective ways to achieve financial wellness.

1. Organize. Get your finances organized – file, categorize, prioritize, automate your finances.
2. Hire. Hire at least one financial professional – CPA, financial planner or financial coach.
3. Use tools. Use tools to help you such as online banking, alerts, software, webinars, teleseminars, TV shows, seminars, classes, boot camps or radio shows.
4. Revisit. Continually review information that you find helpful to refresh your memory and help you stay on track.
5. Mindset. Change your mindset. You have to change your thinking regarding finances. It takes 23 days to start a habit and make a new action part of your daily life. If you want a different financial outcome, you have to make a permanent change regarding your finances.
6. Estate planning. Hire an estate lawyer to setup a will, trust and advanced medical directive.
7. Taxes. Hire a CPA to prepare your taxes (personal and business) to minimize tax liabilities.
8. Financial planning. Hire a financial planner, advisor or financial coach to help you map out a financial roadmap and plan for retirement.
9. Avoid YOLO. Think about your future today, every action you take today affects your financial future so plan ahead and develop contingency plans.
10. Use apps. Use apps such as Mint or Mint Bill, Build Guard, Yodlee, You Need a Budget, Expensify or Toshl to manage your finances.
11. DIY. Read self-help books on personal finance that discuss budgeting, investing, retirement, saving, and taxes. Read articles on websites such as CNN Money, Yahoo Finance, Bankrate.com, MSN Money and morningstar.com. The more you know the more you grow. Money can generate wealth or generate debt, you make the choice.