Start 2025 Right: Make Financial Wellness a Priority

Aah, the beginning of the new year. The excitement of a fresh start. The chance for a renewed sense of optimism for what’s ahead. The abject horror of opening your credit card bill after all that holiday spending …

Perhaps this mixture of feelings is why January has been designated National Financial Wellness Month. After the holiday season, many have spent more money than usual and are eager for a clean slate—not only in their everyday lives but also for their financial well-being. But what exactly does financial wellness mean, and why is it important?

What Is Financial Wellness?

According to a Vanguard survey, 65% of Americans say finances cause significant stress in their daily lives. This is significant, and it shows that many Americans have a financial wellness problem — if a financial situation causes stress, then we haven’t reached a balance with financial wellness.

Financial wellness encompasses your relationship with money. It isn’t just about the money you bring in but also the money that goes out — your daily spending, the debt you carry, and the money you save. Achieving financial wellness means meeting your basic needs while preparing for future financial situations, including emergencies and retirement.

Reaching a point of financial wellness is crucial because it brings a sense of security and reduces the overall stress you feel. Imagine the relief of being able to pay your bills, pay down your debts, and save money for the future. How would that feel? How would your day-to-day life change if you weren’t worried about money? Financial wellness offers a beacon of hope and optimism for a brighter future.

Empower Your Financial Future: 5 Tips to Achieve Financial Wellness

You can (and may need to) do many things to reach financial wellness. Here are 5 tips to get you started:

1 - Assess Where You Are Now

The easiest way to get someplace new is to start where you are. Take a look at your income and spending to get a clear handle on what’s coming in and going out. Answer the big questions first: Are you earning more than you spend? Are you spending more than you earn? Do you have short-term savings? What about long-term savings?

With some of these bigger questions answered, you can take a deeper dive into your finances. How much debt do you carry? What are the interest rates on that debt, and are you paying it down each month? Are you paying your bills on time?

Examine your monthly spending. How much is going to necessities such as food, housing, utilities, and paying down debt? Then, look at other spending categories, such as entertainment, shopping, etc. Are you comfortable with the spending levels, or are there areas where you could spend less and allocate that money elsewhere?

Next, look at your savings. Are you saving anything at all? Ideally, you’ll have an emergency fund, general savings for planned bigger ticket expenditures, and provisions for saving for retirement. If you have kids, you may also save money in a 529 account for their education.

Finally, check your credit. Look to see where your credit score is, and check your credit report to make sure that the information on your report is accurate. According to the Federal Trade Commission, you’ll want to get your credit report at annualcreditreport.com.

2 - Think Big, Then Think S.M.A.R.T

Now that you’ve assessed your financial situation, you are ready to set some goals to achieve financial wellness. So, first off, what is your big-picture financial wellness goal? What will make you feel stress-free when it comes to finances? For some, it will be to get completely out of debt (pay off student loans, pay off mortgage, and don’t carry credit card debt). For others, it may be to have a certain amount of money in their retirement accounts to feel they will have enough to live on in retirement. Each person’s big-picture goal may be different, and that's ok! And you may have more than one big-picture goal, which is also ok!

Once you have your big-picture goal in mind, you can begin to set smaller, short-term goals to help structure your path to the big-picture. These goals can act as milestones so that you can check in to be sure that you are on target to reach your big-picture goal. Breaking your big-picture goal down into smaller goals can help keep you motivated along the way because it allows you to celebrate the smaller wins.

For example, if your big-picture financial wellness goal is to send your children to college debt-free, you will need to explore ways to save money to achieve that. While this goal is concrete, it is also somewhat vague since it doesn't include a timeline or actionable steps. Therefore, you should create S.M.A.R.T. goals (Specific, Measurable, Achievable, Relevant, Time-Based) to guide you on your journey.  

A specific goal is one that is clear and well-defined. A measurable goal is one that can be quantified. An achievable goal is one that is realistic and can be accomplished. A relevant goal is one that is important and aligns with your overall objectives. A time-bound goal is one that has a deadline or target date.

For instance, a S.M.A.R.T. goal might be to set up a 529 account with a specific amount of money for each child before they turn one. This goal is specific (setting up an account), measurable (can I confirm I did it?), achievable (529 accounts exist in all 50 states), relevant to your big-picture goal, and time-bound (to be completed before your children turn one). From there, you can research the projected cost of a college education by the time your children graduate high school, allowing you to plan how much you need to save monthly or annually to achieve your big-picture goal. Additionally, it’s essential to set periodic goals to check the status of each account to ensure it is growing as expected, enabling you to adjust your plans as necessary.

3 - Build in Habits

Now that you’ve examined your finances and set goals, it’s important to regularly review them. This habit of discipline can be a game-changer in your financial journey. Choose a time frame that makes sense for you. Once a month can be good because it is not so often that you create a lot of work for yourself. Still, it is enough to ensure that bills are paid on time and that you can see trends in your spending and saving habits. Recognizing and adjusting these trends when needed can help you maintain your path to reaching your big-picture financial wellness goal.

4 - Automate, Automate, Automate

One of the greatest conveniences of modern money management is the ability to automate saving and spending. You can automate everything from retirement savings to paying your bills.

Why is automation beneficial? You minimize the daily tasks you need to manage by automating your savings and bill payments. You don’t have to log into accounts constantly or worry about paying bills on time—everything is done for you! You won’t need to remember whether you contributed to your retirement account—it’s already done!

Depending on your situation, some automations can occur before money enters your bank account. If you work for a company that offers a retirement plan, you can often delegate that a certain amount of money from your paycheck goes into that plan so that you don’t have to think about it (and there are often tax advantages to doing this, but I am not an accountant so I will not speak to that here). 

If you don’t have an employer-sponsored retirement account, you might have an IRA (Individual Retirement Account) where you can set up automatic monthly deposits. This way, you won’t forget to save. To determine how much you can comfortably invest while still covering your everyday expenses, it’s important to have a clear understanding of your monthly income. With a good assessment of your finances and the right habits, you should be able to figure out how much you can safely invest each month.

Automating bills is also a fantastic opportunity, but it is wise to check which bills are fixed so the prices don’t regularly change (like a phone bill or internet) and which can fluctuate greatly from month to month (such as a credit card or heating/cooling costs). For the fixed bills where you can reliably predict the monthly cost, automating payment takes some work off your plate, and you can plan for it each month. Use your discretion when automating with variable bills such as credit cards and heating and cooling. If you are living paycheck to paycheck, you may want to wait to automate these, so you don’t get surprises in certain months, but if you are in a situation where you have a surplus of money each month, it may be safe to automate these expenses as well.

5 - Prioritize Financial Literacy

According to the National Financial Educators Council, financial illiteracy cost Americans $1506 in 2023. This stastic highlights that many Americans acknowledge that their lack of understanding about money and how it works costs them. Insufficient knowledge about money leads to mistakes (overdrafts, credit card interest rates, spending beyond means) that can add up quickly.

Improving your financial literacy empowers you to make positive financial change. You can enhance your knowledge by taking classes on financial literacy, visiting websites like NerdWallet and Investopedia to read insightful articles, or consulting a financial counselor or coach. Building a better understanding of finance is one of the most effective ways to build your financial wellness.

What actions will you take this year to achieve your financial wellness goals?

*This article is for informational purposes only and should not be construed as specific advice. I am not an accountant or financial advisor and information on this site is not a substitue for information provided by a professional familiar with your situation or unique needs.