To be considered financially well, you should:

1. Be in Control of Your Day-to-Day (and Month-to-Month) Finances.

Does your income comfortably cover your regular expenses? Creating and sticking to a budget is an essential part of financial wellness. There are a multitude of budget tracking apps and platforms that can help you see exactly what you’re spending money on, and places to reduce spending, and develop a plan for the future.

2. Be in a Place Where You Could Absorb a Financial Shock. This Could Include a Hefty Car Repair, Medical Emergency, or Any Other Unexpected Expense.

We know all too well the importance of a rainy day fund. You should plan to have $500 – $2,000 saved³ so that an unforeseen cost won’t derail your financial journey. As a longer-term savings goal, prioritize building an emergency fund that could cover your living expenses for 3-6 months if needed. Other protections or insurance can help you be prepared for these emergencies, adding to your sense of financial security.

3. Determine Your Financial Goals and Stay On Track to Meet Them.

Consider both your short- and long-term financial goals. If you have debt, managing it should be at the top of your short-term financial plans. Managing debt is crucial to financial wellness. This includes paying off high-interest debt as quickly as possible, making regular payments on other debts, and avoiding taking on new debt unless necessary.

Other short-term goals could include saving for an extended vacation, while your long-term plans should include retirement or a down payment on a house.

Consider investing your money wisely with an eye on long-term growth. Investing can help you to grow your wealth over time. Choosing a diversified portfolio of stocks, bonds, and other assets can help to minimize risk and maximize returns.

Finally, as you embark on your financial wellness journey, focus on financial literacy. Understanding concepts like credit scores, taxes, interest rates, and retirement planning will help you make informed decisions and achieve your financial goals.

4. Have the Financial Freedom to Make Choices that Allow You to Enjoy Life.

Financial wellness also means making your money work for your lifestyle. If you are comfortable with your spending habits and savings, you can use your finances for your priority purchases that help you enjoy life– that trip abroad, that new bag you’ve been eyeing, or even a nice dinner out with friends.

In summary, financial wellness is the state of being financially secure, both in the short-term and long-term. It involves budgeting, saving, managing debt, and developing financial literacy. Prioritizing financial wellness can help you avoid both the physical and mental effects of financial stress.

What follows now are suggested steps for you to take based on the age group you’re in. Read all the guidance, including steps for age groups other than your own. That way, you can either know what lies ahead for you or catch up on things you didn’t do when you were younger.

One principle of financial wellbeing is to spend less than what you make each month. If you need to downshift your spending, know that even small cuts can add up to big rewards over time.

Pay off Student Loans

Consider refinancing, which means paying off one or more existing student loan with a single new loan. Not only would this simplify your student debt, but it might also enable you to reduce your monthly spending on such debt, freeing up more money to save for other goals.

Establish Good Credit

Pay bills on time. Avoid maxing out credit cards. Pay down debt. Avoid opening a lot of new accounts within a brief time span. Monitor your credit reports for errors and fix any errors you find. These are just some of the few things you could do to begin to build good credit at this point in your life.

Credit Reports, Credit Scores – What Does It All Mean?

We hear about credit scores all the time but what do they really mean? Are they really that important? This expert-led webinar walks you through everything you need to know!

Build an Emergency Fund

Should you ever face a serious illness or injury, major car repair, or some other unexpected, big drain on your finances, a ready cash reserve could help you avoid a crisis.

Save for Financial Freedom

The sooner you start saving and investing for financial freedom (sometimes referred to as retirement), the more time your money will be able to grow at an increasing rate through the compounding of investment earnings. Compounding is when your earnings attract more earnings, creating a snowball effect that causes your savings to grow ever more rapidly.

Invest with Care

Invest your savings based on the number of years before you wish to achieve the goal you’re investing for, the return you’d like to achieve and your tolerance for risk. Revisit your asset allocation (investment mix) at least once a year or whenever you have a major life event, like getting married or divorced or adding a child to your family.

Increase Your Retirement Plan Savings by at Least 1% Annually

Do this on your own or take advantage of an “auto-escalation” option if your plan offers it. Auto-escalation automatically increases your plan contributions by 1% a year. Also consider increasing your contribution rate every time you get a pay raise.

Stay on Top of Your Asset Allocation

Continue to review your investment mix for retirement annually or whenever you have a big life event.

Save for Your Child’s College Education

Having the right types and levels of insurance are essential to your financial security. Take advantage of employer-sponsored programs like health, long-term disability, and umbrella (liability) insurance. These are typically competitive programs that have been negotiated for group discounts. Revisit your insurance needs at least yearly or whenever you have a major life change, like getting married or divorced or adding a child to your household.

Be Properly Insured

Having the right types and levels of insurance are essential to your financial security. Take advantage of employer-sponsored programs like health, long-term disability, and umbrella (liability) insurance. These are typically competitive programs that have been negotiated for group discounts. Revisit your insurance needs at least yearly or whenever you have a major life change, like getting married or divorced or adding a child to your household.

Take Estate Planning Seriously

To protect your assets and your loved ones, you need at least a will, beneficiary designations, powers of attorney, a living will and a letter of instruction.

Fine-Tune Your Retirement Goals

Be as specific as possible about when you expect to retire. Also, think in greater detail about what your retirement will look like. If any of your retirement goals have changed, you may need to modify your savings and investment strategy accordingly.

Assess Your Financial Readiness for Retirement

Generally, once you retire, you’ll need to replace 70% to 90% of the annual gross income you received during the 12 months or so before you retired. If you’re projected to have a gap between the retirement income you’ll need and the income you’ll have, you have several options to save more, delay retirement or work part-time.

Revisit Your Asset Allocation

To reduce risk, you may wish to move some of your assets into more conservative investments. But remember that your nest egg will have to last the rest of your life — and to stay ahead of inflation, you will generally need to be invested for some long-term growth as well as income.

Start Planning Your Retirement Income

If your workplace plan offers a choice on how to receive your plan balance at retirement, get to know your options. Also, get projections for your Social Security retirement benefit and any pension benefits you expect to receive. You want to create a strategy for turning your nest egg into income that you won’t outlive.

Explore Retirement Planning Resources

Dive into other retirement planning resources, designed exclusively for Civilian Federal Employees.

Ernst & Young (EY) is a recognized leader in helping both current and former Civilian Federal Employees manage day-to-day finances and building a comprehensive retirement plan. In collaboration with EY, WAEPA’s Financial Planning Program provides guidance from financial planners and online resources. Members can view finances, develop good money habits, and tackle goals one step at a time at no additional cost.

If you’d like to speak with an EY Financial Planner, please call (844) 685-3676.