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Published on January 24, 2022
“Those who master money are free to serve others still mastered by it.” — Orrin Woodward
Physical wellness is something we are all aware of since time immemorial though many of us might not have consciously focused on physical well-being or may not have prioritized physical fitness till the pandemic hit us hard couple of years ago. The pandemic has also made us realize the importance of mental well-being to an extent though the awareness is still restricted to a small percentage of the population. However, there is one more ‘Wellness’ which is often overlooked i.e., Financial Wellness.
It is a state of being in which you can meet your current financial obligations as well as the obligations arising in the future. It is being in the space where you feel secure and the money you spend supports your values.
Let’s see what are the 6 vital indicators of Financial Wellness.
Budgeting is the foremost indicator of financial wellness. Budgeting is creating a spending plan that allows you to live within your financial means. You might have general idea of your monthly expenses but unless you put the numbers on paper it’s easy to lose track of your expenses. While creating your spending plan, it’s important to set aside a percentage of your income towards contingency fund & savings and these amounts should be invested in the right place. Budgeting helps you in living a life without taking loans as you would have set aside funds for financial exigency. If you are already in debt, budgeting can go a long way in bailing you out at the earliest. Budgeting helps you in prioritizing your expenditure and ensures you have enough money for the things you need. It helps you in understanding your financial standing and based on that you can create an action plan to increase your income if required.
Overall, budgeting helps you in keeping a close eye on your day-to-day spending habits, understanding the long-term impact of sundry expenses and taking control of your spending.
People get into debt by spending the money that they don’t have. Loans always come with steep interest rates and you are always dependent on your next paycheck to pay the upcoming EMIs. We are living in times when there is no such thing called job security in any industry, therefore, loans and their EMIs adds stress to our lives and makes us anxious.
Debt-free life comes with many benefits, to begin with you lead a life without financial stress or anxiety, debt-free life makes it easier to save more and chose the right investment options where you can grow your money exponentially. A stress-free life gives you enough time, energy and mental space to do research on various investment opportunities and manage your finance judiciously. You will feel more secure leading a life without debt.
Not having contingency fund is one of the main reason people fall into debt trap. Contingency funds are required to meet unexpected expenses arising out of medical emergencies, illness, sudden job loss and major home repairs. Contingency funds create a safety net that makes you feel financially secure as you will be in a position to meet unanticipated expenses. Contingency fund cuts down on the need to borrow money and reduces your stress & tension which adds to your overall financial well-being.
Apart from setting up a contingency fund it’s important to have insurance to cover the uncertainties that can arise in your life. The two most important insurance to have is health insurance and life insurance apart from motor insurance; if you are owning a vehicle. Having insurance is important as it secures you by transferring the financial risk from you and your family to the insurance company. Do a proper research and diligently analyze the insurance policies offered by various companies and choose the one that provides comprehensive coverage. Having a right insurance policy can lessen stress or tension during your difficult times.
Your investments should be very much aligned to your future goals; it is a critical step towards achieving financial wellness. The goal can be anything ranging from buying a house, car, children’s education, retirement corpus to achieving financial independence, starting your own business or anything else. Write down your goals clearly with dates, how much money you would require for each goal. This will help you save and invest money towards goals and track your progress. Investments are the only way to secure your future if you are having only one source of income. Therefore, it is important to identify the right investments based on your goals.
The money that you spend should be aligned to your values and take you towards the life you want to live. This can be achieved by creating a spending plan that is designed around your personal values. If your money is spent just to impress others or if you are spending money on something due to pressure from family, relatives or friends then it will cause negative feelings which can lead to frustration and make your life stressful. Before spending money on something ask yourself, is this expenditure going to make me happy, will this add value to my life, am I spending my money on something which I really want? If the answer is no then eliminate these expenses and focus on using your money in a way that is oriented towards your values and brings joy in your life. This exercise ensures financial as well as mental and physical well-being.
Mental health, physical health and financial health should be in alignment to be an all-encompassing healthy person. Take time out of your schedule and review your financial health using the above 6 indicators and take necessary action towards achieving financial wellness.
FIRE Coach Chidu
India's 1st F.I.R.E Coach
NLP Master Practitioner
Co-Founder & Director @ MindBurger Solutions