Good evening, everyone. I am glad to see all of you back again. After our insightful discussion on Understanding Financial Wellness yesterday, today we will focus on a critical tool for our financial wellness journey: the Financial Wellness Self-Assessment.
Assessing your financial wellness is similar to visiting a doctor for a physical check-up. It is an examination of your financial health and an opportunity to diagnose areas where you might be struggling and identify steps to improve.
Let’s think about Jane, a single parent who, despite her best efforts, found herself living paycheck to paycheck, unable to save money and struggling with credit card debt. Jane felt overwhelmed by her situation and didn’t know how to improve it. Then she stumbled upon the concept of a financial wellness self-assessment. By completing this assessment, she was able to gain a clearer picture of her financial health and understand the steps she needed to take to improve her situation.
Now, let’s begin our own self-assessment journey.
1. Understand your current financial state
The first step in assessing your financial wellness is understanding your current financial state. This includes knowing your income, expenses, assets (what you own), and liabilities (what you owe). It also involves having a clear understanding of your spending habits. Are you spending more than you earn? Are your expenses mostly on needs or wants? Are you able to save some of your income, or are you living paycheck to paycheck?
2. Identify your financial goals
This step involves outlining your short-term and long-term financial goals. Short-term goals might include saving for a holiday, paying off a specific debt, or building a fund for emergency use. Long-term goals might include saving for retirement, buying a house, or saving for your children’s education.
3. Assess your saving and spending habits
This is where you analyze your spending and saving habits. Are you consistently saving a part of your income? Do you have a budget, and do you stick to it? Are you living within your means, or do you rely on credit to make ends meet?
4. Assess your debt management
This involves evaluating your current debts. Do you have a plan to pay off your debts? Are you making more than the minimum payment on your credit cards? Are you avoiding further debt?
5. Evaluate your financial protection
This involves checking if you have adequate insurance to protect yourself and your family from financial risks. Do you have health, life, auto, and property insurance? Do you have an emergency fund to cover unexpected expenses?
6. Consider your future financial state
Finally, consider your retirement plan and other future financial needs. Are you saving for retirement? Do you have a financial plan for the next five years? Ten years? Twenty years?
In Jane’s case, completing this self-assessment allowed her to see her financial picture more clearly. She realized she needed to curb her spending, especially on non-essential items, and focus on paying off her high-interest credit card debt. She also started building an emergency fund to avoid relying on credit for unexpected expenses.
Likewise, this self-assessment will help you all identify the areas of financial wellness you need to focus on. Remember, it’s not about perfection but progress. Your financial wellness journey is unique to you, and this self-assessment is the first step towards creating a plan that will lead you to financial security and peace of mind.
We’re all here to learn, grow, and improve our financial wellness. This assessment is the first step in doing so. So, let’s embark on this journey together and take control of our financial futures. Thank you.