5 Ways to Improve Your Financial Well-being

Financial wellness is essential for numerous aspects of your life, including education, housing, healthcare, and more. When your finances are stable, you have little to worry about and can focus on other important areas of life. If you notice your financial health faltering, it is crucial to address it promptly and treat it with the same urgency as your physical and mental well-being.

Seeking advice from a financial advisor can provide the right guidance on improving your financial health, regaining control over your money, and getting back on track. This article will discuss the five pillars of financial wellness to ensure that your financial health remains steadfast and secure.

Below are five tips to improve your financial health:

1. Set a saving rate

Saving more of your money is an essential practice for securing your financial future. Saving money is crucial for creating a safety net for unexpected expenses as well as planned purchases. Ideally, you should aim to save more than you spend each month. Setting a savings rate, such as 20%, 30%, or even 50% of your salary, ensures that you consistently prioritize saving regardless of fluctuations in your income.

a. Stick to a firm budget

However, saving diligently and consistently can be challenging. This is where creating a budget becomes invaluable. A budget serves as the foundation of your financial future and provides a clear roadmap for managing your expenses and achieving your savings goals. It allows you to allocate your resources wisely and ensures that you stay on track with your financial objectives. Creating a budget is a rather simple process, as it involves listing your income sources and recurring and non-recurring expenses, including necessities like rent, insurance premiums, and groceries, as well as discretionary spending on socializing and other activities that bring you joy.

b. Make Your Budget Work for You

Many people create a budget but struggle to stick to it. This often happens because they perceive it as too restrictive. However, a budget does not have to be rigid or limiting. It simply needs to be tailored to your individual needs and priorities. Incorporating all essential expenses and allowing for reasonable discretionary spending can ensure that your budget is both practical and sustainable in the long term.  A balanced budget enables you to prioritize your savings goals effectively without feeling deprived or restricted.

2. Avoid a debt trap and create an emergency fund

Prioritizing savings over debt accumulation and proactively planning for unexpected expenses helps mitigate financial risks and build a solid foundation for long-term financial success. Falling into a debt trap is one of the primary reasons why most individuals experience a decline in their financial well-being. The relentless cycle of your wants and desires outpaces your limited financial resources and creates an unwanted situation where you may be forced to resort to borrowing through loans and credit cards. Unfortunately, this often results in a loop of debt repayments, making it increasingly challenging to break free. Over time, accumulating debt can create a situation that feels impossible to overcome.

a. Prioritize essential purchases and savings

To avoid falling into a debt trap, it is essential to prioritize your essential purchases and save for them instead of relying on borrowed funds. Planning your expenses diligently enables you to leverage your savings effectively and reduces the temptation to accumulate debt unnecessarily. Exercising restraint and practicing financial prudence is also important to gradually diminish your reliance on debt and regain control over your finances. In addition to prudent spending habits, creating an emergency fund can also act as a safety net during times of financial uncertainty and unexpected expenses that may arise due to circumstances beyond your control, such as job loss, investment setbacks, medical emergencies, or home repairs.

b. Use your emergency fund carefully

However, using your emergency fund carefully and reserving it exclusively for genuine financial emergencies rather than discretionary spending is important. While it may be tempting to dip into your emergency fund for non-essential purchases or lifestyle expenses, doing so compromises the integrity of the fund and undermines its purpose. Therefore, you must always adhere to strict guidelines for accessing your emergency fund. This can ensure that the fund remains a reliable resource during times of genuine need.

3. Automate your investments to ensure consistency

Automating your savings and investments can enhance the way you manage your finances and simplify the saving and investment process. Firstly, automation streamlines the process and removes the mental burden of actively monitoring your finances. Setting up automated transfers or contributions frees up valuable time as well as mental energy. Doing so enables you to focus on other essential aspects of your life, such as pursuing better career opportunities, spending quality time with friends and family, or pursuing personal hobbies and interests.

a. Ensure consistency and discipline

Secondly, automation ensures consistency in your savings and investments. With automated systems in place, there is no risk of overlooking or forgetting to save or invest regularly, leaving no room for error or procrastination. This consistent approach ensures steady growth in your savings and investments over time, laying a solid foundation for long-term financial security and prosperity. Furthermore, automation serves as a powerful deterrent against impulse spending. Automating your savings before you have the chance to spend removes the temptation to divert your funds toward unnecessary or frivolous purchases. This proactive approach reinforces disciplined financial behavior but also limits the need to monitor or micromanage individual accounts constantly.

b. Set a suitable percentage

When automating your investments, you must set a suitable percentage for savings and investments that is easy to manage and does not interfere with your other financial goals. This percentage should strike a balance between building wealth for the future and accommodating your present needs and aspirations without straining your finances. It is also important to reassess and adjust the contribution percentage periodically to ensure continued growth and effectiveness. You can consider increasing the rate by a certain percentage, such as 5% to 10%, on an annual basis. This can help combat the effects of inflation and ensures that your savings pool steadily expands over time.

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4. Increase your earning potential and create multiple sources of income

Enhancing your earnings is one of the most important tips to improve your financial health. Maximizing your income helps you create more opportunities to save, invest, and ultimately build wealth. First and foremost, you can consider pursuing better job opportunities to increase your salary. This often involves upskilling, networking, and actively seeking out career advancement opportunities both within and outside your current company. Enhancing your skills and qualifications, expanding your professional network, and proactively pursuing career advancements helps you seek out higher-paying roles that can increase your earning potential.

a. Leverage your connections

Seeking recommendations from friends, peers, and family members can also be invaluable in discovering new job opportunities and expanding your professional horizons. It is important to leverage your social and professional connections and explore potential leads to identify promising career prospects that align with your skills, interests, and long-term goals.

b. Explore side hustles

In addition to traditional employment avenues, you can explore side hustles to enhance your income. You can consider freelancing in your area of expertise or launching a small business. Side hustles can provide a lucrative supplement to your primary income. In fact, for many individuals, side hustles have evolved into their primary source of income, offering higher potential for financial growth and independence than their full-time jobs. Investing in rental properties is another effective way to generate passive income and increase your earning potential. Purchasing commercial or residential real estate properties helps you earn through rental income. This passive income can supplement your earnings and diversify your income sources. Moreover, real estate offers capital appreciation and can be sold for a higher return later.

c. Invest for dividend income

Additionally, dividend income from investments like stocks can significantly contribute to your annual gains. When you invest in dividend-paying stocks, you not only have the potential to benefit from capital appreciation as the stock price increases but also receive regular cash payouts in the form of dividends.

Ultimately, increasing your earning potential requires proactive effort. It is essential to take the extra step and look out for opportunities. While it is necessary to excel in your current role and perform your duties diligently, taking proactive steps to advance in your career and increase your income streams is equally important.

5. Make financial security a priority to ensure long-term financial well-being

Making financial security a priority is essential for improving your overall financial health and achieving long-term prosperity. Just as you would seek the expertise of a cardio specialist, adjust your diet, and exercise to recover from a heart attack, addressing poor financial health requires proactive steps. Consulting with a financial advisor, taking control of your debt, and prioritizing saving and planning for the future are essential components of this process.

a. Adopt a disciplined approach

To make financial security a priority, it’s important  to adopt a disciplined approach to managing your money. Every decision you make regarding your finances should be guided by the goal of securing your financial well-being in the long term. Remember the age-old saying, “Every penny saved is a penny earned”. Following this simple philosophy, it is important to understand the power of thoughtful spending and prudent financial management. Before succumbing to fleeting desires or impulse purchases, you must consider the impact of your spending on your future financial security.

b. Make conscious choices about resource allocation

Prioritizing financial security also involves making conscious choices about allocating your resources. You need to distinguish between your needs and wants and prioritize expenses that contribute to your long-term financial goals. Focusing on the essentials and minimizing unnecessary spending frees up more resources to invest in your future financial well-being.

c. Plan, set, and review your goals proactively

Take the time to assess your financial situation, identify your short-term, mid-term, and long-term goals, and construct a plan to achieve them. Having clear objectives, such as building an emergency fund, settling all your outstanding debt, or saving for retirement, can help you stay focused and motivated on your journey toward financial security. You must also regularly review your progress, adjust your strategies as needed, and educate yourself on matters of personal finance from time to time to stay on track toward your goals.

In Conclusion

By following the five steps to improve financial well-being,  you could benefit from positive changes in your life and financial situation. If your finances are not in order, it can affect your ability to access healthcare, provide for your loved ones, afford housing, and ultimately feel secure. Therefore, make it a priority and take active measures to improve your financial situation. While you can turn your life around, hiring a financial advisor can be advisable if things seem out of control and you are unsure about what to do or how to proceed. Financial advisors can help recommend long-term, personalized strategies that can benefit you for life.

Use WiserAdvisor’s free advisor match tool to match with seasoned financial advisors who can create a customized plan based on your needs and goals to improve your financial well-being. Answer some simple questions about your financial needs, and get matched with 2 to 3 qualified financial advisors who can best fulfill your financial requirements.