Discover Best Financial Wellness Tips in Tough Times – Learn and Apply

Learning some financial wellness tips for personal knowledge is not going to help you

These are not fairy tales you read to enjoy and waste your time

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You learn and apply them in your financial life so taking action is crucial

I have to admit it took me long time to become what I am right now

financial wellness tips

A person who doesn't care to carry the latest mobile phone or wearing brand names

It comes to the end of willing to live frugally and I had the will to do it

In this post, I will list all my financial wellness tips I know and apply

What does financial wellness mean?

Financial wellness in simple words is about your relationship with money

It is also a plan to deal with financial pitfalls that could impact your financial life

Why is Financial Wellness important?

Having good financial wellness means no stress – who wants to be stressed?

According to study by APA one third of American under extreme stress

While 48% claim that there stress increased in the last 5 years

That's why applying financial wellness tips like building your budget, saving for emergency fund and saving for retirement and kids' education will reduce your stress dramatically

At the same time, if money is an issue as with lot of couples

Then having financial wellness will guarantee a stable relationship and long lasting marriage

What about self confidence and peace of mind?

Yes these are also signs of good financial wellness

Does financial wellness affect health?

I can say confidently yes to a high degree

If you suffer from stress due to not managing your financial life properly

Then what do you expect, stress causes high pressure and insomnia and a major cause of many heart diseases

How can I improve my financial wellness?

By following my below financial wellness tips, you will not improve your financial life

But you will take your life financially to the next level

I like Dave Ramsey and most of his quotes, he said once

Now let's focus on the most financial wellness tips and I will start with

Reliable income

Expenses are always a recurring money going out of your pocket

The only thing that can pay your expenses is your steady stream of cash as known as Income

That's why you should have a steady and reliable income every month

I remember during the financial crisis of 2008 – I tried hard to work in my IT field

Accepting the fact that I was not that competitive to my peers – this caused me to lose so many interviews

I decided I have to work even it is a simple minimum wage and so I worked at Walmart

I had an income and according to that I adjusted my life accordingly

Choosing suitable medical and life insurance

One of the best financial wellness tips to follow today is to look for a suitable medical insurance – who knows what will happen tomorrow

A high percentage of those who fell in debt happened because of a medical emergencies and they couldn't pay the bills and so debts occurred

Life insurance is not less important as you don't want your next generation to suffer unless you have a wealth to pass away to them

Spend less than you earn

It doesn't matter how much you earn

The key to any financial success is to spend less than you earn

Do you remember my Walmart story?

My life had changed and I accepted this fact

I had to cut so many things I used to buy or do when I was working in my career

Pay yourself first – one of the best financial wellness tips

This is one of the best financial wellness tips

If you are going to apply one financial tip then go ahead with this one

But wait a second, I have to tell you what does it mean to pay yourself first

It is a term to deduct (preferred automatically through your bank) from every paycheck a specific percentage or an amount if like

By doing that you force yourself to save

Assuming you don't go back and take part of this money if you are tie with your hand

Budget is like a compass

I always do this challenge and I know I will win all the times

I will ask you what is the percentage of your mortgage or rent to your income?

Don't feel bad if you don't know the answer

Only those who build a budget can answer that

A good budget like the one in my image below can instantly calculate the percentage of your spending

how to budget by calculating percentages of expenses per income
I am using hypothetical numbers not really representing my family income

Anyway, you can use my free budget sheet to achieve something like the above

Build emergency fund

Nothing is better than making sure that you have money set aside to pay for emergencies

For example, you roof top started to crack or your car suddenly stopped

That's why smart financial people suggest to build emergency fund and save money there

Only borrow what you can afford

First you have to know what is your affordability

Well there is a percentage called DTI which stands for Debt To Income

Simply it is a ratio of how much debt you owe according to your income

Usually a DTI of 35% is a good sign that you can somehow be able to pay your debt

Again this percentage means you have to cut 35% of your income monthly to pay your debt – I hope it is clear

Set financial goals for yourself

Those who managed to reach their financial goals admitted that they have them written on paper and hanged near a place accessible and visible to them

Below is my financial goals roadmap, you can find it on my download page

Financial Goals Roadmap
writing down your financial goals

Learn basic financial knowledge

That's right like the difference between assets and liabilities

Asset is anything that puts money in your pocket

While a liability is a thing that takes money out of your pocket

I have a detailed topic about personal financial literacy

I would leave it up to you to read it

Focus on your needs and not your wants

Most of us spend their income buying all the things they can buy

Few of us can differentiate between their needs and wants

Well, what you need is what is very essential to your life

You cannot live without like your shelter, food and transportation

While your wants are what you buy because you want to do so

Like your clothes, a new watch or cell phone

Anyway what I want you to learn is before buying anything

Ask yourself is that a need or want

Avoid falling into debt

One of the best financial wellness tips to learn is to know what makes you fall in debt

It is easy, I would tell you – you go to a car dealership and you buy a car with 5 years loan with whatever an interest rate – the interest rate here is not an issue

You are now putting yourself in debt as you have a commitment of 5 years to completely pay your loan

Who knows what would happen in 2 to 5 years

I am not against buying cars but think about any loan before you commit to it

Beside I am a big fan of buying used cars of high reputation using saved cash or little money from my home equity line of credit

Invest your money

Inflation rate in north America is 1-2% so the whole point of saving is to make your money grow for retirement

With the magic of compound interest, if you invest your money in well managed mutual funds with 12% dividends, you cannot image how much you will make in 10 years

For example, if you invest $5,000 annually with 7% interest after 10 years you will get $100,000

Make sure to have a will

Keeping a will is not expensive at all but it will protect you from getting the government to seize part of your wealth

How much money do I need to be financially free?

Well, before I answer that question

I would like to know the timing of when you need to be financially free

Are you aiming to be financially free at retirement age or before retirement

if you are spending $50,000 annually exclude what you pay for mortgage, I will tell you why shortly

Now you have $50,000 and this is your expenses

When you retire, you need to multiply your expenses by 25

But why 25 specifically?

Well, your invested money are producing let's say around 7% for low risk stocks or mutual funds at the age of retirement you switch your investment to low risk

You need to withdraw 4% and keep 3% of your dividends to be reinvested to cover the inflation rate

So $50,000 by 25 = $1,250,000 so 4% of that amount $1,250,000 x 4% gives you the $50,000 annually

What? do I need to save one million and 250 thousands to retire financially free

Not really, because we forgot about your government pension

If you consider you government pension is dedicated to pay your rent

At the same time, you would have your home fully paid

This is a lump sum good amount to help you in your retirement plus your spouse pension too is not taken in consideration

Now if you need to be financially free before retirement like you quit your job then the amount mentioned above is what you need to save

What are some examples of financial wellness?

It is very easy to tell if you applied all the financial wellness tips or not

A true indication of a financial success in your life is to have the following

Have control on your day to day finances

Sure you can do that with a balanced budget that make sure you apply 20% to your savings

You can read about the 50 30 20 rule

Have enough cushion to handle financial emergencies

By making sure you have the emergency fund with at least $1,000

Some people they start saving 3-6 months of expenses in case they get laid off

Being and staying debt free

It is a nice condition to have all of your debt being paid and staying like that

On track to meet retirement and saving goals

Always review your stocks and mutual funds which you have for your retirement saving plan and making sure you saved money for your kids' education

Michael launched Wealth of Geeks to make personal finance fun. He has worked in personal finance for over 20 years, helping families reduce taxes, increase their income, and save for retirement. Michael is passionate about personal finance, side hustles, and all things geeky.