Financial wellness is one of those buzzwords that you hear a lot, but what does it really mean? Depending on who you ask, you’ll probably hear a range of opinions; some people think it’s about the size of your paycheck, others think it’s about having a zero balance on your credit card bill.

Even while studying finance in college I was never taught a dictionary definition of it. So it wasn’t until I started working in the financial services industry, including time as a financial representative, that I started to gain a better understanding of financial wellness: To me, it’s all about getting to a place where your finances and your future goals won’t be thrown off course by big, unexpected costs that life can throw your way.

So what can you do, practically speaking, to improve your financial wellness? Here are a few places to start.

DON’T SPEND MORE THAN YOU EARN

Soon after graduation, I saw many of my friends and peers fall into the same trap as a lot of recent grads: Once they started earning real salaries, they spent all their money or maxed out their credit cards to keep up with a lifestyle they thought they should be leading. At best, that meant that they’d spent all their money, leaving them unable to buy something that really mattered to them. At worst, it meant they had created a debt hole they would need to dig out of before they could make progress on other important financial goals.

Ultimately, they didn’t have a good grasp on how much was coming in and going out. That’s where a budget can be super helpful. A lot of people hear the word budget and cringe because they immediately think about restrictions. On the contrary, a budget is what lets you balance living your life today with mid- to long-term goals like buying a house or retirement, regardless of your income level. Once you know how your dollars are being spent, you can allocate some for the fun stuff, too.

There’s no one-size-fits-all way to create a budget, but a good guideline if you’re a budget newbie is to spend about 60 percent on essential costs (housing, food, your monthly bills), 20 percent toward savings (retirement or a big trip) and 20 percent on discretionary spending (the fun stuff).

I also think it's a good idea to do an audit of your budget every once in a while to make sure you’re still spending money on the things you care about. I remember working with a lot of clients who wanted to make faster progress on a goal, but felt like they weren't earning enough to make that happen. That’s when we’d go through their expenses line by line and discover costs they had forgotten about — stuff like monthly storage units they really didn’t need or fees on barely used memberships. Usually when I would ask whether this cost could be spared, the answer was typically “yes.” Diverting that money toward their goals made them realize the trade-off was worth it.

Achieving financial wellness doesn’t mean you have to be completely debt-free, but it does mean having a plan for paying it down.

KEEP AN EMERGENCY FUND

It’s the simplest piece of advice I give to people who want to feel more financially secure: Start an emergency fund. Why? Because giving yourself a cash cushion to dip into if your car breaks down or you get a surprise medical bill means you’re less likely to fall into debt to cover those costs. Like any financial goal, it can take some time to build one, and that’s OK. Typically, you’ll want to have somewhere between three and six months of expenses in your emergency fund, with the money kept in an easily accessible savings account so that you can get to the funds in a pinch.

HAVE A PLAN TO PAY DOWN DEBT

Achieving financial wellness doesn’t mean you have to be completely debt-free, but it does mean having a plan for paying it down — particularly for credit card debt. That type of “bad” debt tends to carry high interest rates and it isn’t doing anything for you; it’s not putting a roof over your head like a mortgage does or helping you get an education, the way a student loan does.

Depending on your situation, you should try to pay off your credit card debt in about two years, because you don’t want it to become a hindrance that keeps you from other goals. There have been times when I’ve talked to someone who has a lot of credit card debt, but they tell me they want to start investing in the markets because everyone keeps telling them to. But I remind them that while they might see a 5 percent return in an investing account over a year, they’re paying 19 percent a month in interest on their credit card debt. While it’s important to balance paying debt with other financial goals, I always encourage people to focus on getting rid of credit card debt first so they can build their financial security before moving on to things like investing.

And don’t let all your debt stress you out. I have student loans from college and graduate school that I’m still paying off, and I remember wanting to throw a lot of money at them immediately to get rid of them faster. But overpaying my student loans would have put stress on my budget back then. Instead, I made the minimum payments every month, and started making extra payments when I could. I eventually stopped feeling overwhelmed by my student loans and instead just focused on the steady progress I was making — although I’ll definitely be celebrating when I’m done with those payments in a few years.

SAVE FOR RETIREMENT

Even if retirement feels too far away or you think you aren’t making enough to put anything in a 401(k) or IRA, I always tell people the same thing; there’s no such thing as contributing too little to retirement. Even an amount you’re not likely to miss, like $50 a month or 1 percent of your paycheck, is better than not contributing at all. Because with retirement, the sooner you can start, the better — compound growth means that putting a small amount away early is likely to make a big difference when you’re finally ready to leave the workforce. If you have a 401(k) match through your employer, all the better. Contribute enough to at least meet the match because those are free dollars your company is putting toward your future self.

Building good financial habits like these is a little like getting used to a workout: Implementing those habits takes time, and there will be moments when you slip up. The good news is that if you have a financial plan in place, you’re already working on your financial wellness. Just remember that financial wellness is a journey, not a one-time event, so give yourself time — and a little grace — if you're just getting started on yours.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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