Financial Wellness

Financial wellness is your ability to live a healthy financial life. It is the power to take control of your financial health now and into the future. You can enhance your financial wellness by improving various aspects of your personal finances.

Terry Turner, Financial writer for Annuity.org
  • Written By
    Terry Turner

    Terry Turner

    Senior Financial Writer and Financial Wellness Facilitator

    Terry Turner is a senior financial writer for Annuity.org. He holds a financial wellness facilitator certificate from the Financial Wellness Foundation and the National Wellness Institute, and he is an active member of the Association for Financial Counseling & Planning Education (AFCPE®).

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  • Edited By
    Savannah Hanson
    Savannah Hanson, financial editor for Annuity.org

    Savannah Hanson

    Financial Editor

    Savannah Hanson is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

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  • Financially Reviewed By
    Thomas J. Brock, CFA®, CPA
    Thomas Brock, CFA, CPA, expert contributor to Annuity.org

    Thomas J. Brock, CFA®, CPA

    Investment Management and Finance Professional

    Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.

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  • Updated: September 20, 2022
  • This page features 17 Cited Research Articles
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How to Cite Annuity.org's Article

APA Turner, T. (2022, September 20). Financial Wellness. Annuity.org. Retrieved September 22, 2022, from https://www.annuity.org/personal-finance/financial-wellness/

MLA Turner, Terry. "Financial Wellness." Annuity.org, 20 Sep 2022, https://www.annuity.org/personal-finance/financial-wellness/.

Chicago Turner, Terry. "Financial Wellness." Annuity.org. Last modified September 20, 2022. https://www.annuity.org/personal-finance/financial-wellness/.

What Is Financial Wellness?

Financial wellness is a state of financial well-being in which you can manage your bills and expenses, pay your debts, weather unexpected financial emergencies and plan for long-term financial goals such as building college funds and saving for retirement.

The U.S. Consumer Financial Protection Bureau defines financial wellness — also known as financial well-being — as “the feeling of having financial security and financial freedom of choice, in the present and when considering the future.”

Four Elements of Financial Wellness
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Your overall wellness depends on several factors including mental, physical and financial health.

Financial wellness is important because it improves your overall health and well-being. It allows you to reduce financial-related stress now and for the future.

The principles of financial wellness consist of overlapping areas of your personal finances. While these can affect one another, you can achieve greater results by bringing each under control.

4 Principles of Financial Wellness
1. Budgeting
Creating and sticking to a budget lays a foundation to build your financial well-being. It provides a roadmap to manage day-to-day finances, prepare for financial emergencies and plan for your future.
2. Debt
Managing long-term debt — and eliminating consumer debt — can reduce barriers to saving, investing and long-term financial planning. Knowing how to carefully manage credit can also build your credit score — giving you access to better borrowing rates for mortgages, auto loans and other large purchases.
3. Savings and Investments
Long-term savings and investments can provide financial security and peace of mind for retirement planning. Short-term savings can leave you with cash on hand to cover home repairs, vacations or other planned expenses without having to increase your debt.
4. Protection and Insurance
Insurance or emergency funds can protect you financially from unexpected emergencies. Insurance can cover losses due to fires, floods or health emergencies. An emergency fund, on the other hand, covers other crises. Both can help prevent you from using long-term savings or going into debt.

Financial Wellness vs. Financial Literacy

Financial wellness is not the same as financial literacy. While financial literacy can help you build your financial wellness, they are two very different concepts and should not be used interchangeably.

Difference Between Financial Wellness and Financial Literacy
Financial Wellness
Financial wellness is a state of being in which you can fully meet your current and future financial obligations while feeling secure in your financial future and making choices that allow you to enjoy life, according to the U.S. Consumer Financial Protection Bureau.
Financial Literacy
Financial literacy is the knowledge and training needed to manage your personal finances — such as learning how to create and manage a household budget, investing money for retirement, or participating in one-on-one coaching and counseling to determine how to buy a house or start a business, according to the National Council of State Legislatures.

In short, financial literacy is a set of skills, knowledge and tools you can use to achieve financial wellness.

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How Do You Improve Your Financial Wellness?

It is possible to take a step-by-step approach to improving your financial wellness. Each step will give you an opportunity to understand different aspects of your personal finance.

The more understanding you have, the better suited you will be to feel more secure about your financial situation.

6 Steps Toward Financial Wellness
Create a Budget
You’ll need to know where you’re spending your money each month. Creating a budget will help you live within your means and set realistic financial goals for your future. You should factor in necessary expenses, leisure spending and savings. Being able to track your regular income and expenses will give you a framework to build all other aspects of your financial life.
Build an Emergency Fund
Part of your savings should immediately go toward an emergency fund equal to three to six months of household income. This can help cover expenses should you lose your job or if an unexpected expense occurs. You should also define what constitutes an emergency for you or your household ahead of time so you can properly prepare.
Protect Your Assets
While the emergency fund provides you with some protection, insurance provides more security in other situations. Auto, home and health insurance can offset large, sudden and unexpected expenses and losses.
Reduce or Eliminate Debt
Understand how much debt you can manage. The more debt you have, the less you can put into savings or investments to grow your wealth. Pay off debt to improve your credit score so you can comfortably borrow money for large purchases like a house or car.
Save and Invest
Putting aside money for savings from each paycheck can add up. Consider different short-term savings options such as traditional savings accounts, money market funds and certificates of deposit. If your company has a 401(k) or other retirement savings plan, contribute to it. If your employer matches a portion of your contributions, it’s free money toward your future.
Plan for Retirement or Other Long-Term Goals
The sooner you start saving toward retirement, the more money you’ll have when you get there. Familiarize yourself with other retirement savings options — such as IRAs and annuities. Understand how different types of retirement resources — Social Security, retirement savings, annuities and others — can work together to provide you with income in retirement.
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Financial Wellness at the Organizational Level

Your financial wellness may also be important to your employer. Financial wellness programs have become increasingly popular as a form of employee benefit offerings since 2011, according to a 2021 survey by Bank of America.

Percentage of Employers Offering Financial Wellness Benefit Programs Graph
Source: 2021 Workplace Benefits Report, Bank of America

More than eight in 10 employers surveyed believed that workplace-based financial wellness programs resulted in:

  • greater employee productivity
  • more engaged employees
  • more satisfied employees
  • more loyal employees

There is a perception that the workplace benefits increase as workers’ financial stress decreases through financial wellness.

A solid majority of workers in the United States report they feel stressed when they think about their financial situation, according to the Bank of America survey. The numbers are highest among younger workers.

Employee Sense of Stress Over Finances
Source: 2021 Workplace Benefits Report, Bank of America

The survey also found that 95 percent of employers feel “a sense of responsibility for the financial wellness of their employees” — with 56 percent saying they feel “an extreme sense of responsibility.” That was the highest level ever recorded for this question in the past 11 years.

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Last Modified: September 20, 2022
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17 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Anderson, B. (2019, September 19). U.S. Companies Doubling Down on Financial Wellness Programs. Retrieved from https://401kspecialistmag.com/u-s-companies-doubling-down-on-financial-wellness-programs1/
  2. Carlson, J. (n.d.). What Is Financial Wellness? Retrieved from https://www.corporatewellnessmagazine.com/article/what-is-financial-wellness
  3. Chalk, S. (2019, December 4). Financial Wellness Different than Financial Literacy. Retrieved from https://401ktv.com/financial-wellness-financial-literacy-2/
  4. Consumer Financial Protection Bureau. (2017, May). CFPB Financial Well-Being Scale. Retrieved from https://files.consumerfinance.gov/f/documents/201705_cfpb_financial-well-being-scale-technical-report.pdf
  5. Deczynski, R. (2021, September 13). The Hottest Perk of the Pandemic? Financial Wellness Tools: Amid the Tumult of the Great Resignation, Give this Underutilized Benefit a Try. Retrieved from https://www.inc.com/rebecca-deczynski/financial-wellness-benefits-pwc-survey.html
  6. Ellevest. (2021, September 20). A Guide to Practicing Financial Wellness. Retrieved from https://www.ellevest.com/magazine/personal-finance/financial-wellness-guide
  7. Ellis, E. (2022, September 6). How To Make a Financial Wellness Checklist. Retrieved from https://www.pfcu.com/financial-education/moneyline-blog/post/mb/2022/09/06/how-to-make-a-financial-wellness-checklist
  8. Klawitter, A. (2020, November 2). 7 Tips to Achieve Financial Wellness. Retrieved from https://www.meratas.com/blog/tips-to-achieve-financial-wellness
  9. National Financial Educators Council. (n.d.). Financial Wellness Definition. Retrieved from https://www.financialeducatorscouncil.org/financial-wellness-definition/
  10. Ramsey. (n.d.). The 2021 Financial Wellness Benefits Study. Retrieved from https://www.ramseysolutions.com/corporate-wellness/financial-wellness/resources/2021-research-study/benefits-overview
  11. Ramsey. (n.d.). What Is Financial Wellness? Retrieved from https://www.ramseysolutions.com/corporate-wellness/financial-wellness
  12. Rose. S. (2021, April 9). What Is Financial Wellness? Retrieved from https://www.opploans.com/oppu/articles/what-is-financial-wellness/
  13. Schiavo, A. (2021, June 17). Employers Are Recognizing “Financial Wellness” Isn’t Just a Buzzword Anymore. Retrieved from https://www.benefitnews.com/news/employers-are-recognizing-financial-wellness-isnt-just-a-buzzword-anymore
  14. Sleek, S. (2015, August 31). How Poverty Affects the Brain and Behavior. Retrieved from https://www.psychologicalscience.org/observer/how-poverty-affects-the-brain-and-behavior
  15. University of San Diego. (n.d.). What Is Financial Wellness? Retrieved from https://www.sandiego.edu/financial-wellness/overview/definition.php
  16. Wasik, J.F. (2019, October 11). Why You Need Financial Wellness. Retrieved from https://www.forbes.com/sites/johnwasik/2019/10/11/why-you-need-financial-wellness/?sh=5599ac6255d6
  17. Yoder, L. (2022, January 10). 4 Ways To Improve Your Financial Wellness. Retrieved from https://www.northwesternmutual.com/life-and-money/4-ways-to-improve-your-financial-wellness/