Three Pillars of Financial Wellness

It’s always an opportune time to reevaluate and bolster our financial well-being. It's a time to reflect on our financial habits, educate ourselves on important financial concepts, and implement strategies to improve our overall financial health.  

As we look at ways to evaluate and improve our broader financial wellbeing, we can focus on three pillars of financial landscape: saving, spending, and security.  

Saving: Building a Strong Financial Foundation 

Saving money is the cornerstone of financial wellness. It provides you with money for your budget, a safety net, funds for your financial goals, and opportunity to build wealth over time. This is especially important when considering longer-term goals. Here are key considerations for effective saving: 

Understanding Accounts: Familiarize yourself with different types of savings accounts such as traditional checking accounts, savings accounts, certificates of deposit (CDs), and retirement accounts like 401(k)s and individual retirement accounts (IRAs). Each serves different purposes and offers various benefits. 

Setting Goals: Define short-term and long-term financial goals to guide your saving efforts. Whether it's eliminating debt, saving for a down payment on a house, or planning for retirement, having clear objectives motivates disciplined saving. 

Automating Savings: Take advantage of automation tools provided by your bank to set up recurring transfers from your checking account to your savings account. This "pay yourself first" approach ensures that saving becomes a priority. 

Emergency Fund: Aim to build an emergency fund equivalent to three to six months' worth of living expenses. This fund acts as a buffer during unexpected financial setbacks like medical emergencies or job loss, preventing you from dipping into long-term savings or going into debt. As you start to build up emergency funds a personal line of credit (Sage LOC) or home equity line of credit (HELOC) can be a helpful backup resource. 

Spending: Maintaining Mindful Expenses 

Spending is a necessary part of life – we make daily decisions on how, where, and when to spend our money. Spending wisely is essential for maintaining financial wellness. This involves making conscious decisions about where your money goes and ensuring it aligns with your values and priorities. Consider the following tips for responsible spending: 

Budgeting: Create a realistic budget outlining your income and expenses. Track your spending to identify areas where you can cut back and allocate more towards savings or debt repayment. Online banking tools or budgeting apps can help streamline this process.  

Differentiating Needs vs. Wants: Differentiate between essential expenses (needs) and discretionary spending (wants). Prioritize essential needs like housing, utilities, groceries, and healthcare, while being mindful of discretionary expenses such as dining out, entertainment, and luxury items.  

Appreciating vs. Depreciating Assets. Will your purchase increase in value over time (appreciation)? Or lose value due to use (depreciation)? When weighing options, it may be better to spend on home improvement which builds the value of your property than a new car which loses value as it racks up the mileage. 

Debit vs Credit: Using a debit card instead of a credit card whenever possible is a helpful way to keep spending within your means. It can also help you avoid building up credit card debt. Because debit cards are usually tied to your checking account, they often offer customizable spending alerts and transaction limits to help you keep your spending on track. 

Avoiding Impulse Buys: Practice delayed gratification by implementing a "cooling-off" period before making non-essential purchases. This allows you to assess whether the item is a true necessity or merely a fleeting desire. 

Security: Safeguarding Your Financial Assets 

Protecting your financial assets from fraud, theft, or unexpected events is paramount for achieving and maintaining financial wellness. The following strategies can enhance your financial security: 

FDIC Insurance: Make sure your bank deposits are federally insured by working with a member FDIC bank. If you have deposited amounts over the FDIC insurance limit of $250,000, learn how you can extend insurance coverage for all of your deposits with CDARS or ICS services.  

Monitoring Accounts: Regularly review your bank statements, credit card statements, and investment accounts for any unauthorized transactions or suspicious activity. Report any discrepancies to your financial institution immediately. 

Setting Up Alerts: Utilize account alerts offered by banks and credit card issuers to receive notifications for large transactions, low balances, or unusual account activity. These alerts serve as early warning signs of potential fraud or identity theft. You can get started in online banking or your mobile banking app.  

Strengthening Passwords: Use strong, unique passwords for online banking, investment platforms, and other financial accounts. Enable multi-factor authentication (MFA) for an extra layer of security, requiring a verification code sent to your phone or email. Keep in mind that banks will never ask for your password.  

Educating Yourself: Stay informed about common scams and fraud tactics targeting consumers, such as phishing emails and text messages, fake websites, and phone scams. Be wary of unsolicited requests for personal or financial information and verify the legitimacy of any unfamiliar contacts or offers. 

By integrating these principles of saving, spending, and security into your financial habits, you can cultivate a solid foundation for achieving and maintaining financial wellness. Remember that financial well-being is a journey, and consistent effort and vigilance are key to long-term success.  

With the resources and initiatives available at First Fed, now is the perfect moment to embark on a journey toward enhanced financial wellness. The First Fed branch teams are happy to help you set up your accounts and guide you on the path to financial wellness. 

Interested in having a financial education presentation at your organization? We offer free sessions on a variety of topics. For details, contact Jen Swanson at [email protected].