What is financial wellness?

For most of us, financial wellness is a lifelong journey. Like physical and emotional health, financial wellness is something we consistently work on—and which can be just as good for us as well. It’s a comprehensive approach to financial security—one that builds peace of mind and contentment by putting us in control of all aspects of our financial lives.

Defining financial wellness

Financial wellness goes beyond merely having a healthy bank account. It’s the ability to feel secure in the knowledge that you can live within your means, achieve your goals for the future, manage financial risk, and care for your loved ones. It’s about making good financial decisions and, just as importantly, feeling good about the decisions you make.

The importance of financial wellness

Financial wellness is integral to our overall well-being. Research shows that financial stress takes a toll on our relationships (it’s a leading cause of divorce¹), intensifies underlying medical conditions,² and impacts mental health and cognitive function.³ Financial challenges are a growing source of anxiety among Americans, as many live paycheck to paycheck and are unable to make any headway on their goals. Prioritizing financial wellness allows you to move forward with confidence knowing that you are financially secure and able to anticipate, and successfully bounce back from, any unexpected setbacks.

Building blocks of financial wellness

Creating a working budget

The first and most important step to financial wellness is creating a balanced budget. Start by adding up all your sources of income and the frequency of payment. Next, make a list of all your fixed expenses, such as housing (rent/mortgage), utilities, and loan payments to see how much you have left over each month. From there, you can start to allocate money to savings, or look for ways to cut back on spending so that you can save.

Developing good savings habits

Good savings habits are essential to financial security. Take advantage of an employer-sponsored retirement plan, such as a 401(k) plan , which can help build your retirement savings in two ways: You can put part of each paycheck into it and invest it, and you could also get extra money from your employer through a match. Contributions may be pre-tax or after-tax, depending on your plan options.

Another way to “automate” your savings is to have a set amount transferred from your checking to savings on a regular basis. This can be an excellent way to build an emergency fund and cover unexpected expenses such as medical bills or car repairs. Aim to set aside enough money to cover three to six months of living expenses so that you don’t have to borrow money in case of a financial setback.

Managing debt

While mortgages, car loans, and student debt are common forms of debt, it’s important to remember that debt can be a significant barrier to financial health and a persistent source of stress. One way to reduce financial stress is to develop a debt management and repayment plan, like the highest-interest-rate method. To begin, make a list of all your debts and the interest rates being charged. (Note: The average credit card interest rate is currently 24%!)⁴

Once you have that information, look for ways to eliminate loans with the highest rates. Use any extra money that comes in to pay down your balance or consolidate multiple loans under a single, low-cost lender. If you have a mortgage, you can save thousands of dollars and pay off your loan faster by adding a little extra to each payment or making an additional payment or two each year. (Just make sure there are no prepayment penalties on your contract.) Going forward, be sure to monitor your credit score and maintain a healthy debt-to-income ratio so that you can negotiate the most favorable rates on any loans you take out in the future.

Investing for the future

Investing is key to building long-term wealth and financial security. Start by understanding your investment goals, risk tolerance, and time horizon. Invest tax-efficiently with the understanding that the objective of investing is to generate growth and income, safely, not to time the market. Diversify your investment portfolio across various asset classes, such as stocks, bonds, and real estate, to mitigate risk. And perhaps most important of all, get professional guidance if you want help in making investment decisions, planning major life events, or are committed to leaving a legacy.

Practical tips for financial wellness

Set clear financial goals

Establishing clear financial goals provides direction and motivation for your wellness journey. It empowers you to take control of your financial life and enhances decision-making skills along the way. Since long-term goals such as buying a home, starting a business, or preparing for retirement may seem overwhelming at first, try breaking them down into smaller, more manageable milestones. Having specific objectives and time frames will help keep you accountable and give you more opportunities to celebrate your progress.

Practice mindful spending

Mindful spending involves being intentional and deliberate about your approach to money. Before making a purchase, ask yourself if it aligns with your priorities and if it will bring real value to your life. You may find it helpful to implement a waiting period for nonessential purchases to prevent impulse buying. If you must use a credit card, make sure you can pay it off in full when the bill comes due. Keep a record of your monthly spending and identify areas where you can cut back to increase savings. This disciplined approach to spending can help reduce stress and ensure that you are continuing to make progress on your goals.

Educate yourself

The more knowledge you have, the more confident you’ll be in the financial decisions you make. To improve your financial literacy, be sure to find and read articles like this one, listen to videos and podcasts, or attend financial workshops or seminars. Remain curious and continue to learn about topics like budgeting, investing, and retirement planning. You can also build financial literacy by connecting with industry professionals who are willing to share their expertise and help guide you along the way.

Make regular adjustments

Financial wellness is an ongoing journey that requires continuous assessment and adjustment. Schedule regular check-ins to review your budget, assess your progress, and, if needed, tweak your approach. While your long-term goals will rarely change, you may have to adjust your strategy and tactics if your financial situation or circumstances change.

Ways to protect what’s most important

Life doesn’t always go according to plan. Since you may run into a few detours along the way, it’s important to protect yourself—and your loved ones—from the financial impact. That’s where insurance plays a key role.

Health insurance*

Health insurance is a vital safety net for families, offering crucial financial protection against unexpected medical expenses. Without it, a sudden illness or injury could result in overwhelming debt, jeopardizing your family's financial stability. Health insurance covers most medical costs, including doctor visits, hospital stays, and prescription medications, allowing you to access necessary care. By investing in a comprehensive health insurance plan, you're not only safeguarding your family's health—but also ensuring long-term financial peace of mind.

Life insurance

Your income is a valuable asset—possibly the largest you will ever have. Life insurance helps protect that asset, and the people who depend on it, by replacing your income in case you pass away. Life insurance can be especially helpful to your loved ones because the money they receive is generally tax free** This allows them to keep more of the money you leave them and be able to use it faster than might otherwise be possible. With this financial coverage in place, you can be sure that your family’s lifestyle and future are well protected.

Individual disability insurance

Much like life insurance, individual disability insurance helps replace your income in case something unfortunate happens. It’s not uncommon or only a concern for older workers: One in four of today’s 20-year-olds can expect to be out of work for at least a year because of a disability.⁵ With this coverage, benefits are paid if you become temporarily disabled due to an accident or sickness. It provides financial security and peace of mind by making sure you will continue to have money coming in to help pay your bills and maintain your lifestyle until you are able to return to work.

Long-term care insurance

As America’s population ages, the need for long-term care continues to rise. In fact, estimates say 48% of people turning age 65 will need some type of paid long-term care services in the future.⁶ Since the cost of this care can be prohibitively expensive, long-term care insurance can be an effective way to protect your quality of life and hard-earned savings by helping to pay for your care—whether it’s in a nursing facility or your own home.

Estate planning

While estate planning is not technically insurance, it can be an important form of protection. That’s because it helps preserve your assets by making sure they are distributed in a tax-efficient manner. And while many people think estate planning is only for millionaires, it can be an effective tool for anyone who owns cars, real estate, jewelry, or any other physical assets they would like to pass along to their heirs. 

Related Resources

¹2022 PwC Employee Financial Wellness Survey, January – February 2022.
²John A. Sturgeon and Alex J. Zautra, “Social Pain and Physical Pain: Shared Paths to Resilience,” Pain Management, January 2016.
³Carrie Leana, “The Cost of Financial Precarity,” Stanford Social Innovation Review, Spring 2019.
⁴Federal Reserve, Consumer Credit – G.19, release date: March 7, 2023.
⁵Simply Insuance, 95+ Disability Insurance Statistics & Facts, June 3, 2024.
⁶Christine Benz, “100 Must-Know Statistics About Long-Term Care: 2023 Edition,” Morningstar.com, March 29, 2023.

*New York Life Insurance Company does not issue health insurance policies. 
^**Life insurance benefits are income tax free in most cases; however, they may be subject to state and local taxes.

Neither New York Life Insurance Company (NY, NY), nor its financial professionals, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.