Financial wellness and financial security are correlated.
Financial security is whether you have enough money to pay for your lifestyle. Your financial
wellness depends on your lifestyle and your financial habits. How do you live? How are you
achieving your short-term or long-term financial goals? More importantly, what is the quality
of your financial life? Some signs of financial wellness include having an emergency fund,
paying off your debt completely, saving for retirement, and leading a financially disciplined and
frugal life.
A recent poll finds that Canadians spend at least two hours a day worrying about their
finances. That’s related to our sense of financial wellness instead of the facts of reality.
A research study by the Financial Consumer Agency of Canada in 2018, indicated that 74%
of Canadians scored above 50 (out of 100) across various parameters of financial wellness,
reflecting a higher degree of financial well-being.
Take a look at the survey results and find out how you personally rank across different factors.
If you’re financially well, you’re already on the right track. However, if you are falling short on
one or more components, keep reading this article.
The A, B, C, D, E, F, G’s of Financial Wellness
Anyone can achieve financial wellness through financial discipline and a commitment towards
their financial transformation.
The first step is to learn how to be financially well. We’d like to call it the ABCDEFG’s of
financial wellness.
A - Accountability
It starts with being accountable for your financial behaviour to yourself. You have to take
responsibility for your financial decisions and actions, because you will be the one suffering
for any of your financial mistakes, before you cultivate financial discipline. If you are cheating,
you are cheating yourself.
B - Budgeting
More than half (51%) of the Canadian population doesn’t have a budget. At least one-third of
Canadians feel that they don’t require a budget.
How are you supposed to reach your destination when you don’t even have a road map? Your
budget ensures that you’re spending less than what you make. Research indicates that people
with a budget are less likely to default or fall behind on their financial commitments than the
ones who don’t. If you are struggling to make ends meet, create a budget and follow it.
Budgeting is like working out and dieting. If you want it to work, you make it a part of your
lifestyle.
C - Communication
Maintaining proper communication is critical for your financial well-being and your mental
health. If you’re having trouble getting around a financial issue, ask a friend, a relative, or a
professional for help. Most people would be happy to help you.
Similarly, if you’re ready to bring your financial life back on track, discuss your plan with your
partner. Get your family on board and discuss major financial decisions, especially the ones
that impact the entire family. There is no shame in asking for help. Never be afraid to ask
questions.
D - Discipline
Financial discipline is a must-have trait for financial wellness. You can’t be financially
independent or have financial freedom without being disciplined. It’s the same as working out
and eating properly. It’s a mindset.
• The first thing to do if you know you are struggling, is to identify the problem. Why are you
struggling? For example, Are you impulse shopping?
• The second is to acknowledge the problem.
• The third is to create a plan to eliminate such behaviour. It could be as extreme as getting
rid of your credit cards, (lock them away or freeze them in your freezer) or as simple as
keeping your partner or a friend in the loop to avoid making mistakes.
• Talk to someone about what you are doing and they can help you stay disciplined
• Begin to save some money. $5 per day will help.
E - Education
At least two-thirds of Canadians have faith in their financial knowledge, but research reflects
otherwise. Nearly 67% of Canadians don’t? pay their credit card bill in full; 72% don’t have
emergency savings; 43% don’t track their spending.
You have to understand your personal finances in order to manage them efficiently. You can
start by reading blog posts (like this one), watching informative videos on YouTube such as
www.financeispersonal.ca and The Women’s Collection. Seek professional guidance no
matter how much money you have. The key is to improve your financial knowledge
consistently. We are always learning and it is never too late. Learn about financial literacy
and never stop learning.
F - Frugality
Frugality may not be your first preference, but it sure is a necessity for financial wellness. Live a frugal lifestyle. If you learn to live within your means now, it will be so much easier when you retire and you will happily grow old. The goal is to learn to live within your means and if you can’t go out, don’t. Start analyzing your expenses and focus on what actually adds value to your life and what doesn’t. Begin to live a needs versus a wants life. Take a close look at what you need rather than what you want?
G - Goals
Finally, you need to have financial goals.
When my parents came to Canada they had three goals: 1) find a place to live 2) get a job 3)
pay back the church in Chicago that loaned them money to come to Canada.
They were committed to paying off their debt as soon as possible so that they could begin
building their life together in a new country.
Start by creating short-term goals. It could be saving for a car or a down payment for your
house.
List your goals with an estimated time period and amount. Once you start achieving these, set
longer-term goals, such as paying off your mortgage, saving for retirement, or that muchawaited world tour!
Bottom Line
It doesn’t matter whether you’re struggling personally or need advice for your business; these
tips and strategies apply everywhere. You have to understand the detrimental impact of debt on your life. You lose control over your life (and business) when you have debt.
Always look at things with a long-term perspective. No one will even remember that you wore
the same dress twice or ten times in the past! Focus on your long-term goals, and invest
accordingly! The more that you can reduce costs, the longer you can make your savings last.
It’s about time we bring frugality back in fashion.
Let’s make FRUGALITY fashionable!