Financial Wellness

What Is Financial Wellness?

Financial wellness is a state of financial well-being in which you can comfortably 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 (CFPB) defines financial wellness, also called financial well-being, as “How much your financial situation and money choices provide you with security and freedom of choice.”

Four Elements of Financial Wellness

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 stress and improve the overall quality of your life.

At a high level, there are four principles of financial wellness.

4 Principles of Financial Wellness

1. Budgeting

Creating and sticking to a budget lays a foundation to build your financial well-being. It enables you to manage day-to-day finances, prepare for financial emergencies and plan for your future.

2. Debt

Managing debt, which includes eliminating high-cost consumer debt, can significantly enhance your ability to save, invest and accumulate wealth.  It can also help improve your credit score, giving you access to better borrowing rates for mortgages, auto loans and other large purchases.

3. Saving and Investing

Saving and investing are critical to building financial security and retiring comfortably. Short-term savings provide liquidity to cover home repairs, vacations and other infrequent costs, while long-term investments provide the means to grow wealth.

4. Managing Risk

Growing wealth is an important long-term objective, but preserving your wealth is just as important. Insurance policies and emergency funds are two common ways to protect your finances. Insurance mitigates exposure to catastrophes, such as fires, floods and life-threatening illnesses. An emergency fund, on the other hand, helps you avoid incurring debt or tapping your long-term investments when you encounter temporary financial difficulties, such as struggling to pay your bills after a job loss.

Although financial wellness isn’t discussed as often, it’s an important part of financial planning. When working with retirees, I often emphasize that they need to be comfortable with the plan they’ve laid out in order to really enjoy retirement. It’s about using your money in a way that supports you best, without constantly worrying.

Brandon Renfro, Ph.D., CFP®, RICP®, EACo-Owner of Belonging Wealth Management

As a Certified Financial Planner™ professional and Retired Income Certified Professional®, Brandon Renfro is well-versed in the financial information and strategies needed to meet retirement goals. In addition to co-owning Belonging Wealth Management and assisting clients, Brandon writes regularly for financial publications.

Financial Wellness vs. Financial Literacy

Although it can help you build your financial wellness, financial literacy does not ensure financial well-being.

Difference Between Financial Wellness and Financial Literacy

Financial Wellness

Financial wellness is a state of being in which you can comfortably satisfy your current financial obligations while feeling secure in your financial future and making choices that allow you to enjoy life, according to the CFPB.

Financial Literacy

Financial literacy is the knowledge and training needed to manage your personal finances. 

This includes several considerations, according to the National Council of State Legislatures.
Learning how to create and manage a household budget
Investing for retirement
Participating in coaching and counseling sessions to determine how to buy a house or start a business.

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

How Do You Improve Your Financial Wellness?

You can take a step-by-step approach to improve your financial wellness. Each step allows you to bolster your personal finances for greater financial security.

The more you understand how to achieve financial wellness, the better your financial situation will be.

6 Steps to Achieving Financial Wellness

Create a Budget

You need to know your income sources and payment stream, as well as your monthly expenses. Creating a budget can help you live within your means and establish realistic financial goals for your future. 

Be sure to consider your essential living expenses, as well as your discretionary expenditures, including leisure spending.

Build an Emergency Fund

As soon as you implement a budget and start saving money, you should build an emergency fund. Ideally, it should hold at least six months of living expenses. 

A healthy emergency fund can help cover expenses in the event of a job loss or another type of financial strain.

Protect Your Assets

An emergency fund provides near-term protection against small- to mid-size financial challenges. For significant financial challenges, such as the loss of your home or a permanent physical disability, insurance is a more appropriate risk-mitigating measure. Auto, home, health and life insurance can offset large, sudden and unexpected losses and expenses during life’s challenges.

Reduce or Eliminate Debt

You need to know the amount and nature of your various debts. The more debt you have, the less money you can save and invest to accumulate wealth. Strategically pay off debts to improve your financial position and boost your credit score.

Save and Invest

With a sound budget and a minimal debt load, you should be able to start consistently saving money. 

Look to maximize the yield earned on your money with these types of accounts. 
High-yield savings accounts
Money market funds
Certificates of deposit (CDs) 

As you accumulate savings, be sure to assume a long-term perspective. This means investing in growth-oriented assets and longer-term fixed-income instruments. 

If your company has a 401(k) or other retirement savings plan, contribute to it as soon as possible. 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 can begin contributing to a tax-advantage retirement vehicle, the better. The tax advantages, coupled with the power of compound interest, can have a powerful effect on your wealth. 

Familiarize  yourself with any plans offered by your employer, as well as individual retirement savings options, such as IRAs and annuities. Understand how different types of retirement income sources, like Social Security, retirement accounts and annuities, can work together to provide a holistic retirement solution.

Financial Wellness at the Organizational Level

Unsurprisingly, your job can play a key role in your financial wellness as well, and employees appear to be doing better and better in this area.

According to the 2025 Workplace Benefits Report by Bank of America, financial wellness is trending up. More than half of employees rated their financial wellness as good or excellent in 2025, compared to 47% in 2024.

Part of this growth may be attributed to workplaces doing more to help their employees with financial wellness. 

Bank of America had previously found that more employers were offering financial wellness benefit programs to their employees in the years following the COVID-19 pandemic.

A previous survey also found that 95% of employers feel “a sense of responsibility for the financial wellness of their employees” — with 56% indicating that they feel “an extreme sense of responsibility.”

Editor Chase Campbell contributed to this article.