Habits that Build Financial Well-Being
Definition of Financial Well-Being
According to the CFPB, financial well-being is defined as:
“A state of being wherein you have control over day-to-day, month-to-month finances; have the capacity to absorb a financial shock; are on track to meet your financial goals; and have the financial freedom to make the choices that allow you to enjoy life.”
With this definition in mind, SAM suggests these guiding principles for structuring your financial habits:
- Spend less than you earn. Bolster your savings and reduce your expenses. Remember, just because you can have something doesn’t mean you need it.
- Save for future spending. Get yourself into a habit of saving. Start simple by taking advantage of any automated savings or investments that exist. Then build your habit, checking in as you get closer to your goal.
- Only borrow what you can afford. Don’t deny yourself, but avoid spending for an outward show or status symbol. Consider the loss to your long-range goals when you choose to spend now. Remember, every dollar borrowed today is a dollar less to spend tomorrow.
- Grow your money. Work with a financial or tax advisor to structure investments so you can gain tax advantages. Contribute as much as you can to employer-sponsored retirement plans, especially if your employer makes matching contributions.
- Boost your earning capacity. Even as your earnings increase, try to live off a set income level and add to your investments. Allowing your interest-earning accounts to grow will help you offset any downturns or emergency expenses.
- Protect what you have. This applies to not only insurance for yourself, your property and income, but also your investments.