Pathway to financial wellbeing

Time for individuals to evaluate their financial health and strategies for the upcoming year.

In today’s fast-paced world, financial stress is a common concern. According to a recent survey by the American Psychological Association, 65% of Americans cite money as a significant source of stress, a figure that rises to 82% for those under 43. As we begin the new year, January serves as an opportune reminder of Financial Wellness Month, a time for individuals to evaluate their financial health and strategies for the upcoming year.

Transforming personal finances

Contrary to popular belief, personal finances don’t have to be a dark cloud in an otherwise sunny life, irrespective of one’s financial situation. Vanguard’s guide to financial wellness provides simple yet effective guidelines to help individuals manage their financial obligations, reduce their debts, and prepare for unforeseen financial emergencies, all while keeping retirement planning firmly in focus.

Money-is-a-source-of-stress-for-many-Americans

Financial wellness is defined in the guide as:

“The objective financial state of an individual, household, or family. It signifies the ability to fulfil current and near-term financial obligations and to be on track to achieve your future goals.”

However, it’s important to remember that achieving financial wellness isn’t a one-time accomplishment but a continuous journey that requires consistent effort and commitment.

Gaining control over finances

The first step towards attaining financial wellness is gaining control over your finances. This involves understanding your income and expenditure patterns and creating a budget. Even though budgeting may not be everyone’s cup of tea, it’s an invaluable tool for organising your finances.

Budgeting is not a one-size-fits-all exercise and should suit your specific needs. Once the budget is in place, individuals can focus on implementing effective debt repayment strategies, innovative spending strategies, and nurturing their retirement savings.

Preparing for the unexpected

Life can be unpredictable. Cars can break down, pipes can burst, and accidents can happen. That’s why the next step towards financial wellness involves preparing for uncertainties.

One crucial suggestion is establishing an emergency fund to tackle sudden expenses such as unexpected repairs or sudden spending shocks. Additionally, it recommends setting aside savings to safeguard against potential income loss.

Navigating the complex world of insurance is another essential aspect of financial preparation. It is also vital for legal readiness with appropriate documentation like a Will, power of attorney, or beneficiary designation.

Advancing towards objectives

The third stage of the financial wellness journey involves setting long-term goals, such as retirement, education funding, and healthcare planning. Savers should strategise their approach towards these objectives. Tax-advantaged accounts like a defined contribution retirement plan and health savings account can be beneficial for long-term goals such as retirement and future healthcare costs. These vehicles allow investors to grow their wealth while saving on taxes.

Flexible finance

Taxable accounts may be a suitable choice for those seeking more flexibility and easier access to their funds. These accounts can aid in achieving shorter-term goals like holiday planning or making a down payment on a car or house.

Benefits of financial wellness

Achieving financial wellness carries significant benefits. It enables investors to capitalise on new saving and spending opportunities, provides a safety net for unexpected financial shocks, and aids in wealth accumulation.

Supporting you every step of the way on your path to financial security

Should you require further information or assistance on your journey to financial wellness, please do not hesitate to contact GSB. We’re here to support you every step of the way on your path to financial security.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.

THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

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