With today’s headlines, you might be wondering if your financial situation is secure. Taking stock of your finances can be a great place to start establishing financial certainty. While evaluating your financial picture and addressing your financial wellness might sound stressful, it can actually be both reassuring and illuminative.
Before you (or your advisor) address your unique situation, let’s look at the factors that go into financial wellness. If you already work with an advisor, some of these topics might be familiar. For individuals considering whether to work with an advisor, here’s a sneak peek into the type of planning and guidance you can expect when working with Odyssey Group Wealth Advisors.
How to Determine Your Financial Wellness
Studies have found that high financial stress can lead to depression, poor physical health and decreased life satisfaction. On the other hand, when you know what your goals are and have a plan to achieve them, have an understanding of your finances (sometimes called financial literacy) and engage in sound financial behavior, your confidence and quality of life improve.
Expense vs. Income
Understanding your expenses and income, or cash flow, is an important part of financial wellness. If you have a monthly budgeting app or track that information in a spreadsheet, you probably already have a good idea of your cash flow. If you don’t, take a few minutes to think through the expenses you pay every month, and grab a recent pay stub or bank statement to get an idea of your monthly income.
Writing out the expenses and income for the past month or two will give you a good idea of your typical cash flow. Common expenses include housing, food, health care (including insurance costs), utilities, transportation, personal expenses and debt. If you are using your pay stubs to track income, keep in mind that some of these expenses might already be accounted for, prior to receiving your take home pay.
Do You Have an Emergency Fund?
Establishing and funding an “emergency fund,” or stable supply of cash available in the event of an unforeseen expense, can go a long way toward reducing financial stress and getting your financial wellness on track. Generally speaking, your emergency fund should cover three to six months of living expenses. Start with saving three months’ worth of expenses, then aim to double that figure.
Emergency funds are for emergencies, as the name suggests. Those situations typically include losing your job, paying for medical or dental emergencies, handling an unexpected home or car repair or paying for unplanned travel expenses, like a funeral or visiting a sick family member. Any of these situations can be stressful, so having cash available to pay for the unexpected will provide reassurance and relief should you be faced with an unfortunate and unforeseen event.
The Evolving Nature of Retirement
There’s no one-size-fits-all approach to saving for retirement. What’s important is making a plan and following through with it.
Generally, saving for retirement involves the use of employer-sponsored and individual retirement accounts, but depending on your situation you may also have access to pension accounts or even a health savings account that can double as a retirement fund. Employers often match retirement savings and at certain ages individuals are allowed to contribute additional funds to their savings.
The very nature of retirement is also evolving. While many individuals still opt to work for one company for the entirety of their careers, moving between jobs, taking a sabbatical or switching industries mid-career is more common than it was a generation ago. These decisions should be carefully weighed and consulting with an advisor, employee benefits department or retirement plan administrator will help ensure that you have enough savings for the path you choose to take, including when and how you retire.
Check on Your Credit Score
Your credit score can have a major impact on the terms of your loan—or even your ability to take out a loan. Periodically checking on your credit score not only allows you to see your financial picture as a bank or lender would see it, but it also gives you the chance to protect yourself. A credit score check up can reveal instances of identity theft or errors that need to be corrected.
How Do You Feel During Tax Season?
Tax season is another period where financial stress is high. An unexpected tax bill, whether from a mid-year move between tax jurisdictions, a windfall or a new job, can derail a financial plan, so it’s important to prepare appropriately ahead of time.
With the right planning, tax season can actually be an opportunity to celebrate or recalibrate your financial situation and focus on your financial wellness. It can also be a natural time to consider your estate and how you should be preparing for future stages in your financial journey.
Financial Wellness Today—and Into the Future
Today’s financial wellness is tomorrow’s opportunity. Finding sound financial footing, even in times of high inflation or a looming recession, is important to living a healthy and fulfilling life. Working with a financial advisor is a convenient, yet powerful, approach to fortifying your financial wellness.
At Odyssey Group, our team of experienced financial professionals can help you ask—and answer—the right questions, so that you are more financial fit and ready to take on the challenges of the future. Get in touch to learn more.
Ready to evaluate your financial wellness? Take the quiz below!
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