5 steps to supporting your financial wellness

Thinking about your financial future can be overwhelming, especially if you have big goals, and big debt. Even if money is the last thing you want to think about, it’s important to have a sense of where your finances are so you can achieve financial wellness.

 

Here are five steps to help you reduce financial stress, and step towards financial wellness:

 

Step 1: Set and prioritize your goals

To achieve your financial goals, make sure they’re SMART - specific, measurable, attainable, relevant, and time bound. Trying to do everything at once can be too ambitious and can result in failure. It’s easiest to plan your financial future by creating short- and long-term goals, and then prioritizing them.

Short-term goals

        • One you hope to accomplish within the next 12 months
        • One that may be small step you’re taking to eventually achieve a long-term goal

Long-term goals

        • One you hope to accomplish beyond the next 12 months
        • Requires time and planning to achieve. Consider where you want to be in 5, 10, and 20 years from now

 

GRS-Callouts-1121-1_07

Step 2: Create a budget

Budgets will outline the overall state of your finances and can help you accomplish your goals by allocating your income into three categories:

        1. Fixed expenses are costs you incur to meet your basic needs. These include rent or mortgage, food, utilities, insurance, and transportation and typically, they take about 50% of your income   
        2. Savings help you meet your short- and long-term goals. Savings include money put towards a down payment on a property, children’s post-secondary education, or retirement. Typically, you should save at least 20% of your income
        3. Wants are products, services, and experiences you’d like to have but aren’t necessary. Wants include entertainment and vacations. This category can consume 30% of your income  

 GRS-Callouts-1121-1_03

 

You may need to change the allocation percentage of each category to meet your financial goals. For instance, you could reduce your spending in the wants category to make sure you can cover your fixed expenses or contribute more towards your savings goals.

 

Step 3: Eliminate bad debt

Bad debt has a significant negative impact on an individual’s ability to meet their financial obligations and goals. Avoid racking up credit card bills you can’t afford to pay off monthly and buy-now-pay later promotions.

GRS-Callouts-1121-1_10

Step 4: Save, save, save

    • A good rule to live by is to have six months’ income saved in the event of job loss or an emergency

    • Having a little extra money saved for unexpected expenses like home or car repairs can help reduce financial anxiety

    • Saving for life events like buying a home, education, or retirement can also help ease financial stress in the future

Step 5: Pay down good debt

Find ways to pay down larger, more expensive items like a car or home loan. These should be fixed expenses included in your budget and part of your short- or long-term goals to pay off. If you get a bonus or salary increase, consider putting the extra money towards these expenses to pay off your debt sooner.

Start today

Taking small steps towards your financial goals can help reduce financial stress and contribute to overall financial wellness. It’s important that your goals are realistic and align with your long-term objectives

Written by Salina Shariff, Senior Director, Retirement Solutions & Financial Wellness & Taylor Clancy, Client Support Specialist