Financial wellness may seem like an unattainable goal. It’s no surprise why: 73% of Americans ranked finances as the number one stressor in their lives. But reaching a state of financial wellness may actually be more achievable than you think. In a recent webinar hosted by EdAssist by Bright Horizons, our team of experts outlined three steps to create and execute a financial wellness plan.

Whether your goal is to feel better about your money, pay down debt, or learn how to make ends meet, read on for a step-by-step guide to managing your finances and achieving your education, career, and life goals.

What is Financial Wellness?

Most individuals view financial wellness as feeling secure and in control of their finances. There are a few different components usually needed in order to truly feel confident in your money, including:

• Meeting your current financial obligations
• Building an emergency fund to serve as a safety net
• Growing additional savings to meet your short-term goals
• Planning for the future, such as managing your credit, having a plan to pay for education for yourself or your children, and saving for retirement
• Making informed decisions based on your individual values and available resources

When you have a handle on all five of these characteristics, you’ll put yourself on a journey to achieve your life goals.

3 Steps to Financial Wellness

1. Meet Your Financial Obligations

The first component of achieving financial wellness is to meet your obligations. Here’s how to do it.

Calculate your income

Start by getting a full grasp on your income, which can be broken down into a few different categories:

• Gross earned income: The amount you earn before taxes and payroll deductions are taken out
• Net earned income: The amount leftover after those deductions are subtracted
• Unearned income: Any type of passive income from investments or non-investments, such as stock dividends, rental property income, annuity income, social security benefits, or a pension

Track your expenses

Next it’s time to accurately track your expenses. Here are the major categories to account for, plus some commonly forgotten costs associated with each one.

• Housing expenses, including property taxes and renters or homeowners insurance
• Transportation, such as auto loans, gas, insurance, public transportation, rideshares, and annual registration fees
• Food, both groceries and dining out
• Mobile phone and devices, including apps and streaming services
• Child, elder, and/or pet care
• Travel and entertainment

If you’re tech savvy, try using a budgeting app. For a more traditional approach, use a spreadsheet or envelope method. Also check out the spending plan worksheet available in your EdAssist portal, if your company offers the benefit.

Adjust your income and spending

Understanding your income and expenses allows you to make informed financial decisions. They could be small decisions like whether or not to buy the latte to big decisions like how and when to afford to going back to school. The answer to any financial situation depends on how your income compares to your expenses. If your expenses are more than you earn, you ultimately have two options: increase your income or decrease your expenses (or both).

Ideas to increase income:

• Start a side hustle
• Take on more hours as a non-exempt employee
• Upskill or gain an additional degree or certification to qualify for a higher paying job

Ideas to cut back expenses:

• Cancel some of your subscriptions and memberships
• Be conscious of your seasonal energy bills
• Reduct food costs by meal prepping or dining out less
• Evaluate your housing situation
• Shop around for lower insurance costs
• Consider alternative transportation options

Develop a budget

There are many different ways to create a budget.

• Zero-based budget: Assign all of your income to expenses and savings goals, resulting in zero dollars left at the end of the month
• 50/30/20 budget: 50% of your income goes to needs, 30% to wants, and 20% of savings
• Cash envelope budget: Use labelled envelopes filled with cash for each of your spending categories

Experiment until you find the one that works best for you.

2. Manage Your Assets and Liabilities

The next step to financial wellness is to understand and create a plan for your assets, liabilities, and credit.

Assets are items that hold monetary value, such as cash, savings account balances,

investments, personal property, and real estate.

Grow your assets by setting up short-term and long-term goals, such as building an emergency fund, obtaining a degree to advance your career, eliminating debt, or retiring by a certain age.

Liabilities are your debts or other financial obligations – things like credit card balances, taxes, overdraft protection, and Buy Now Pay Later balances.

The goal is to reduce your liabilities, which is easier to do when you have a budget and consciously spend your money.

Credit history is tracked by three credit reporting agencies: Equifax, Experian, and TransUnion.

The information on your credit report can be viewed by lenders, landlords, prospective employers, insurance and utility companies and more. Check your credit report at least once a year to understand what’s on there – it’s free at annualcreditreport.com.

As you track your credit, keep in mind these three goals to work towards:

• Keep your debt-to-income ratio below 36%
• Shoot for a credit utilization rate under 30%
• Strive for a credit score of 750 or higher

3. Align Your Goals With Your Finances

This final component is where you pull everything together so your someday can start now. Set your financial goals based on your own values. This helps you identify what is important to you so you can consistently make the financial decisions to get there.

Once you’ve decided on your goals, categorize each one by timeframe. Then you can make a plan that includes the exact action items you need to take to achieve your goal by the target deadline.

No matter what you’re working towards, start with the same two basic steps: setting up a separate bank account and implementing automatic transfers. That way you keep the funds separate from other accounts and you commit to saving each month. Start where you can, even if it’s putting away small amounts, then increase contributions as you can.

On top of your regular savings contributions, look at all of the available resources to help you meet your goals. For instance, thoughtfully use income increases or lump sums like a bonus or tax refund to reach it faster. For education goals, look at employer’s tuition benefits, scholarships, grant programs, and federal financial aid to supplement your one contribution.

When you have clear, tangible goals, you’re more likely to make the choices that support them, instead of wondering why you can’t take your finances to the next level.

Ready for Someday?

There’s no better time than now to start crafting your dream life vision. By implementing the three steps to financial wellness, you’ll have a sound plan in place to make it happen.

For many people, that means finding a way to take the next step with their education or professional development. Check with your employer to see if you have financial coaching benefits from EdAssist available. Our experienced team can help you create a plan based on your education and financial goals.

Learn more at LevelUp Studio.