Financial Wellness 101: Understanding Your Money

How often does money – or, let’s be honest, the lack thereof – stress you out? 

Feeling overwhelmed and anxious about finances is an experience many of us share. In fact, money-related worries consistently top the American Psychological Association’s list of stressors, emphasizing the link between financial wellness and mental health. 

But there is good news. Whatever your financial obligations, with a little time and determination, improving your financial well-being is more straightforward than you might think. 

What is financial wellness? 

Financial wellness is a state of being in control of your money. It's about having enough breathing room in your budget each month to cover bills and enjoy life without worrying about coming up short. 

Improving your financial wellness is also about being prepared for the unexpected, like a car repair or job loss, and having a plan for your future (whether that's a dream vacation or a comfortable retirement). 

The relationship between financial wellness and mental health 

Financial worries can be a significant source of stress for many people, leading to anxiety, depression, and other mental health issues. On the other hand, mental health struggles can impair our ability to manage finances effectively, which can make financial difficulties worse. 

What’s more, mental health issues have been linked to physical symptoms and chronic conditions, including insomnia, diabetes, and heart disease. Think about it: how many nights have you lost sleep worrying about making ends meet? 

Financial stress is a silent burden that can weigh heavily on our mental and physical wellbeing. That’s why getting our finances under control is a crucial step towards reclaiming our peace of mind. 

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5 financial wellness factors 

Achieving financial wellness means having a handle on five main factors: 

1. Staying within your budget 

A budget is a plan for how you’ll spend, save, and manage your money. Creating a budget can make it easier to meet your goals and improve your financial wellness. While the best budgeting method is the one you can stick to, you might consider trying one of these common budgets: 

• Zero-based budgeting
• 50/30/20 rule 
• Envelope budget system

2. Keeping track of all expenses 

One of the biggest aspects of budgeting is to track your expenses, but even if you don’t stick to a particular budget, you can still stay on top of your spending. This may involve hanging onto your receipts, balancing your checkbook, or reviewing your bank statements. 

3. Preparing for the unexpected 

Unexpected expenses are often caused by stressful situations, such as a car accident or trip to the emergency room. In these situations, the last thing you want to deal with are financial worries. But the truth is, many of us don’t have an emergency fund to cover unexpected costs. 

Building up your savings may take time, but just setting aside a few hundred dollars for emergencies can give you peace of mind. 

4. Creating a plan to achieve your financial goals 

Another aspect of financial wellness is having a clear picture of your short- and long-term financial goals. 

Ask yourself questions like: Why am I tracking my spending? What am I saving for? What steps do I need to take to go on my dream vacation? 

Once you understand your motivation behind your personal money goals, it’s easier to stay on track with your budgeting efforts. 

5. Arming yourself with information 

Staying informed about financial and economic matters is a key aspect of financial wellness. Personal finance isn’t everyone’s cup of tea, of course, but it’s essential to at least learn the basics of budgeting, saving, investing, and managing debt. Our library of Money Tips is a good place to start. 

Financial wellness vs. financial literacy 

Financial wellness and financial literacy are two terms that are often used interchangeably, but there are some key differences between the two. 

Financial literacy is about having the knowledge and understanding of financial concepts. This includes topics like budgeting, saving, investing, and credit. Financial literacy is important because it gives people the ability to make sound financial decisions. 

Financial wellness, on the other hand, is about more than just financial knowledge. It's about having a healthy relationship with money. This means making choices that lead to financial stability and security. It also means knowing how to manage stress and anxiety around money. 

6 benefits of financial wellness 

1. Achieve short-term and long-term financial goals 

Focusing on financial wellness is important for anyone with financial goals. Whether you’re budgeting for a new TV or saving for a down payment on a house, improving your financial wellness can help you stay on track and make wise choices with your money. 

2. Enjoy more financial options 

When you’re “financially healthy,” so to speak, you’ll have more flexibility in how you spend, save, invest, and budget your money. 

For example, once you’ve reached a point where you’re sticking to a budget and paying your bills on time, your credit score is likely to improve. In turn, you may be able to qualify for better interest rates or a wider variety of personal loans. 

3. Reduced anxiety and worry

One of the greatest benefits of improving your financial wellness is the peace of mind that comes with it. When you have a solid financial plan and sufficient savings to handle the unexpected, you’re less likely to be stressed and anxious about money matters. Financial wellness allows you to feel more in control of your life. 

4. Improved self-esteem 

Being financially stable can be a major boost to your self-esteem and overall confidence. You have a sense of accomplishment and pride in being able to manage your money effectively, which can positively impact other areas of your life. 

5. Better relationships 

Money problems are frequently cited as a significant contributor to divorce. Given how much stress financial uncertainty can put on relationships, it should come as no surprise that financial wellness can create a more harmonious household. 

6. Better health 

Financial stress can lead to a number of health concerns, including high blood pressure, muscle tension, and digestive issues. Even worse, you might avoid seeking medical treatment for fear of going into debt, which only perpetuates the cycle of ill health. 

Considering that these issues can increase your risk for heart attack, stroke, migraine, ulcers, and chronic pain, improving your financial well-being could, quite literally, save your life. 

How do I know if I’ve achieved financial wellness? 

Your version of financial wellness may look different to someone else’s. In general, you’ve achieved financial wellness when you have control over your bills and everyday expenses, are actively building up your savings, and are prepared to handle financial emergencies. 

But working toward all those goals at once can be overwhelming, and you’re more likely to give up if you’re discouraged. So, what if you’ve only managed to stick to a budget for three months and not lost anymore sleep over money? Consider that a win! 

When should I start working on my financial wellness? 

Most financial experts will tell you the best time to start improving your financial wellness is now. The sooner you start, the more time you'll have to build up your savings and invest in your future.

Will building my credit improve my financial well-being? 

Credit is a critical aspect of your personal finances no matter your age. If your credit isn’t great, improving your FICO credit score should be one of the first goals you set on your journey to financial wellness. 

Building your credit could make you eligible for a wider variety of money solutions, including higher loan amounts and better interest rates. With more options, you may be able to consolidate debt, handle unexpected expenses, or even improve your housing situation. 

Here are a few ways to fix your credit score: 

• Make on-time payments. 
• Take out a credit-builder loan (only if you’re able to repay it). 
• Get a secured credit card. 
• Become an authorized user. 
• Spend and borrow responsibly. 

Why do I need an emergency fund? 

Saving for emergencies is a big component of financial wellness. Just think: if you have enough money in the bank, you won’t worry as much if your car breaks down or you need to run out and buy a new washing machine. These situations are inconvenient and stressful enough. Having an emergency fund to fall back on gives you peace of mind. 

Ideally, your emergency fund should be enough to cover at least three months’ worth of expenses. You’ll also want to replenish your emergency fund every time you use it. 

Get the financial help you need today 

Reaching a state of financial stability takes time. But what if you’re facing an emergency expense now and don’t have the money to cover it? That’s where Advance America comes in. 

From Payday Loans and Cash Advances to Installment Loans and Lines of Credit, we offer a variety of options to meet your financial needs. Best of all, you don’t need good credit to get approved. Start your application now and get an approval decision in minutes.