Your definition of financial stability may not necessarily be the same as how your friends, family, neighbors or colleagues describe it.
Though we can all agree that financial stability really boils down to how confident and secure you feel with your finances.
According to the CFPB, financial wellness 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.”
On the financial wellness spectrum, where do you lie today?
Are you feeling pretty down and stressed about money? Or are you feeling like you are on top of the world? Or maybe somewhere in between where money may be tight, but you aren’t racked with debt and high expenses?
Here are 5 neutral areas you can use to assess where you are on the financial wellness spectrum.
5 tips to assess your financial health
Making money is the cornerstone of financial wellness. Are you consistently making money every month and can trust that money will come? Having a set schedule for when you get paid and roughly knowing how much you’ll make is so important to reaching your financial wellness goals.
Do you have a reliable source of income?
Understanding where your money is going every month is so important to stay on track. If you don’t budget, how do you know that you’re not overspending on groceries? Entertainment? Double paying for network cables that could be included with your credit card or bundled with something else?
Do you have a process to budget and review your budget every month at least?
The goal of an emergency fund is to have cash available for when you’re unemployed or you have an unexpected expense to deal with like your car breaking down. However, more than half of Americans (or 51 percent) have less than three months’ worth of expenses covered in an emergency fund.
Do you have an emergency fund you can tap into if you need it?
Your credit score is another critical part of your financial health. Things like late payments, too much debt or high balances negatively affect your credit score and make you look riskier to banks and credit unions. There are three major credit bureaus which report on your credit similarly but with some minor differences. Having a basic understanding of why your credit score would increase or decrease is important to keeping your credit score healthy.
Do you understand the ins and outs of your credit score specifically?
Along with credit scores, understanding debt is so important. Sometimes you hear that debt is good to have a little bit of as long as you’re continuing to pay it off (credit card debt, car loan, mortgage, etc.). Where it gets confusing is that there are so many different types of debt that don’t carry the same weight. While having debt in the form of loans can be beneficial to help build your credit, if you have too much and you aren’t paying it back quick enough, your financial health will suffer greatly.
Do you have less than $15,000 in debt?
How can you increase your financial health?
Start by reading through these 5 options above and if you can’t answer “yes” to any of them, there’s some work you can still do.
More and more employers recognize the value in offering financial wellness as a voluntary benefit as well. If your employer isn’t providing one with a loan solution, it might be time to ask.
To learn more about TrueConnect’s No Credit Check Advance program which does not require a credit score but may help you build your credit*, watch this short demo. And share it with your HR/Benefits team if it’s something you would use.
*Approval if you meet identification criteria