financial wellness

Financial Wellness: The Key to a Happier Life

Being stressed about finances is never a good thing. Financial wellness directly correlates to our overall well being. Being over your head in debt, losing your job, or having to pay for a crippling unexpected expense, all can cause massive amounts of stress. That stress can have negative effects on your mental and physical health. Financial wellness addresses these problems and directly improves other areas of your life, not just your finances. It’s important to plan for your future, address risks, and track towards goals more than ever before. Nearly gone are the days of employer-sponsored pension plans that provide guaranteed retirement income for life. Rather, the burden now falls on employees themselves to invest and plan for their future. There are several ways to improve your financial wellness, and in doing so, improve your overall quality of life!

Take Action Today, not Tomorrow

Life is busy and there are plenty of excuses that provide a reason we don’t take control of our finances. The honest truth is people who procrastinate likely aren’t successful people. Whether that rings true in managing their personal finances, their job, or other aspects of life, excuses for delaying something as important as your FUTURE, isn’t going to lead to success.

If you’re not sure whether you’re saving enough for retirement, racking up credit card debt, or don’t know where to begin when looking at your entire financial picture, what reason is there to put it off? Likewise, if you’ve built up significant cash savings, been awarded stock options, or inherited a large sum of money, these are good problems to have, but you have to take the appropriate measures to ensure you’re maximizing their benefits before it’s too late.

It’s not uncommon even for people with wealth to get stressed over money. It gets complicated! Especially when it comes to discussing estate planning, legacy, gifting to family, and achieving charitable goals. Millennials won’t have to worry about that anytime soon, however, your parents or grandparents are likely thinking about it.

Tackling the issues our personal finances confront us with are important to face head-on when they arise. They’re not going to magically go away.

Understand Your Cash Flow

All financial plans start with helping individuals or families understand their cash flow. How much money is coming in and how much money is going out? It’s simple right? Well, not quite. Most people can’t answer that question off the top of their head if they’ve never completed a financial plan before. Without knowing the answer, however, it becomes nearly impossible to ensure you’re adequately saving for retirement, saving for other goals (e.g. home purchase, emergency savings, etc), or making progress towards eliminating debt.

For starters, filling out an expense worksheet, or using a budgeting tool such as our budgeting software (click the button below to get started, it’s free!), can help you get a basic understanding of your cash flow. If you’re not a big spender, but accumulating lots of cash and already have an emergency fund in place, you might consider putting more cash flow towards retirement savings or a brokerage account (for access prior to retirement). If you’re overspending, and not making progress towards your goals, seeing how much you actually spend on coffee every month or those regular Uber rides can be eye-opening. Either way, making a lasting impact on your cash flow requires making behavioral changes around your spending habits. Try cutting up your credit card, deleting the Uber app (although your friends might hate you for it), or preparing coffee in the morning to take with you to work. Even small steps can result in a positively quantifiable improvement.

Once you have an understanding of the money that’s coming in versus what’s going out, you can make adjustments and automate towards specific goals. For example, if you don’t have an emergency fund built up, one of the first things you should do is either set aside a lump sum into a high-yield savings account or begin automating cash transfers every month (align with your payday) to the account. Typically, 3-6 months’ worth of living expenses is adequate to cover unexpected expenses or potential unemployment.

Mastering your cash flow will certainly provide peace of mind knowing that you’re making meaningful progress towards your goals. In turn, this will improve your financial wellness and probably relieve much of that physical and mental stress that goes along with worrying about it!

Prioritize What’s Meaningful

As our careers progress, families form, and aspirations grow, it becomes increasingly difficult to prioritize your money and allocate it appropriately to what’s meaningful to you or your family. It can start out fairly simple. You might say “okay, I’m contributing to a retirement account, check; I’ve got my emergency fund, check; I’m taking advantage of all my employee benefits, check”. However, things become much more complicated when you fold another person’s finances into the equation with marriage,  having kids, starting a business, or scaling the corporate ladder with increasingly more complex compensation packages.

Taking the time to sit down (with your significant other if you have one) and prioritize your goals from top to bottom, will improve your financial wellness. Let’s say you want to provide for your children’s entire education costs. Establishing tax-advantaged accounts such as a 529 and front-loading contributions (529’s allow 5x the normal annual gift tax exclusion amount to be contributed) can be advantageous if that ranks high on your priorities.

Or, if you want to retire early and travel the world, stocking away as much as you possibly can in a brokerage account might be near the top of your list (for access to funds outside of retirement accounts that have a penalty for early withdrawal). The key takeaway when it comes to prioritizing goals is to include the people in which they impact in conversations (usually spouse and/or family), and communicate openly and honestly. After all, money is just a tool we use to achieve meaning, purpose, fulfillment, and/or joy in our lives. It should be used for the things that we value most in order to lead a life full of happiness. 

The Bottom Line

Financial wellness can be achieved, regardless of how time-consuming, stressful, or intimidating the initial steps might be as it will be well worth it in the end.  Not only will it be quantifiable in the improvements you make to your balance sheet and cash flow, but you’ll feel better mentally and physically as well. Knowing you’re making progress towards achieving meaningful goals or milestones, certainly helps you sleep better at night.

Sometimes, it takes a helping hand or accountability partner to help with the vast amount of knowledge and know-how it takes to maximize financial decisions and build a truly comprehensive financial plan. In fact, most people outsource it to Financial Planners like ourselves! Regardless of where your finances currently are, we want to help you. Don’t hesitate to schedule a meeting with us today, and start making progress towards a healthier financial, mental, and physical you!

Levi Sanchez, CFP®, CPWA®, CEPA®, BFA™
Levi Sanchez, CFP®, CPWA®, CEPA®, BFA™
Levi Sanchez is a CERTIFIED FINANCIAL PLANNER™, CERTIFIED PRIVATE WEALTH ADVISOR®, CERTIFIED EXIT PLANNING ADVISOR®, BEHAVIORAL FINANCIAL ADVISOR™ designee and Founder of Millennial Wealth, a fee-only financial planning firm for young professionals and tech industry employees. Levi’s been quoted in the New York Times, Business Insider, Forbes, and is a frequent contributor to Investopedia. He is an avid sports fan, personal finance and investing geek, and enjoys a great TV show or movie. His mission is to help educate his generation about better money habits and provide financial planning services to those who want to start planning for their future today!

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