What is financial wellness and why is it important?

Read time: 6 to 7 minutes

Financial wellness means knowing you can live and retire on your terms. It's about managing your day-to-day finances, protecting yourself from unexpected expenses, and saving for your short- and long-term goals.

What does financial wellness look like for you?

It's different for everybody. But whatever it looks like for you, the best way to achieve long-term financial wellness is to start planning today. We can help. We've created a financial wellness guide with tools and resources to help you along the way.

Why is financial wellness important?

Out-of-balance finances affect every part of your life. You might feel less confident—or even stressed—which can take a physical and mental toll.

It's easier to live a happy, healthy life when you take control of your finances. With our help, you can:

  • Reduce your debt, including paying off credit cards and student loans.
  • Prepare for emergencies.
  • Have money for the things you want.

All while you're saving for the things you need!

How can you achieve financial wellness?

You can significantly improve your financial future with a series of small changes.

1. Get started
As you start on your financial wellness journey, begin by:

  • Setting goals. Start your journey toward financial wellness by choosing the goals that are most important to you. After all, you won't achieve the goals you don't set.
  • Meeting your employer match. Don't miss out on free money. If your employer offers matching contributions, take advantage of them.
  • Paying off your debts. Make a list of all your debts and their interest rates. You'll get more bang for your buck if you pay off your high-interest debts first. If you have credit card debt, that's probably where you're paying the highest interest. Learn more about debt-busting strategies.
  • Knocking out your student loans. If you saved your low-interest student loans for last, now's the perfect time to start increasing your payments. Learn more about tackling student debt.

2. Keep the momentum going
Now that you've got a plan for getting your debt under control, get ahead of the game by:

  • Preparing for emergencies. Build your savings to cover unexpected medical needs, home fixes, car repairs, or job loss. Start by putting away a little bit with every paycheck. Maybe you can afford to put away as much as 10% from each paycheck—or maybe just a few dollars.
    Choose an amount that works for you and stick with it. Before long, you'll have the peace of mind that comes from knowing the money is there when you need it. Build an emergency savings account.
  • Being ready for the unexpected. Make sure you keep your beneficiary information current. If you want to provide for loved ones or support the charity or cause that means the most to you, a well-thought-out estate plan is critical. This is where expert advice can be especially valuable.

3. Plan your retirement and make progress toward your goals
Keep growing your savings and build a legacy by:

  • Setting money aside so you'll have what you need later. Start saving a little more each month for that vacation, new car, or other short-term goals you've been dreaming about. Also, now's the time to boost your savings in your employer-sponsored plan and take advantage of tax savings so you can afford the retirement you've always wanted.
  • Getting the most from your retirement accounts. Keep increasing your account contributions as much as you can while you're still earning. And make sure your savings will last as long as you need them. Think about how much you'll need to live comfortably—without taking out more than you need. Estimate my retirement income.

Financial wellness is more than just a mindset—it affects your life every day. And getting there is easier than you may think. Now that you know the basics, choose a topic you want to focus on next!

Vanguard suggests saving 12% to 15% of each paycheck for retirement. This includes any contributions from your employer. If you can't afford to make a small increase in your savings rate right now, do it the next time you get a raise—it'll add up quickly!

Whenever you invest there's a chance you could lose money.