Being financially savvy will help you sleep better at night
Financial wellness has less to do with how much money you earn, and more to do with how you manage it.
There are all these goals in your head that you want to achieve, but one thing always seems to be weighing you down: not having enough money.
For most people, money is a sensitive topic to discuss, yet it’s the biggest concern keeping us up at night. A financial security survey reported that 29 per cent of Canadian employees identified money as their prevailing worry.
The financial system can be overwhelming to understand, let alone navigate, especially when your finances cause you stress. The first step to achieving a calmer viewpoint lies in understanding the connection between your health and obtaining, and applying, financial management smarts.
In this blog post, I’ll explain the meaning of financial wellness and financial literacy (or savoir faire), and how they’re connected.
In my research, I’ve found that the best definition for financial wellness comes from the U.S. Consumer Financial Protection Bureau, which describes it as “having financial security and financial freedom of choice, in the present and in the future.”
Meanwhile, according to the Financial Consumer Agency of Canada, financial literacy is “having the knowledge, skills and confidence to make responsible financial decisions.” It further explains that “A financially literate society helps build a strong economy, which in turn makes all our lives better.”
What’s interesting about both these definitions is that neither of them mentions anything about the amount you’re earning. In other words, achieving financial wellness does not demand that you meet an earnings threshold, the same way that financial literacy does not suggest that making a certain amount of income means you’re financially literate. Obviously, earning a good wage helps, but it does not directly improve financial wellness or automatically suggest you’re financially savvy.
For example, Sam earns $4,000 and spends $4,500 per month while Israa earns $2,500 and spends $1,500. Who do you think is in a better financial position at the end of the month?
The answer seems obvious in theory – Sam makes more money after all – but not so much in practice. According to an article published by CBC News, Canadians owe $1.68 for every $1 they earn of household disposable income, and this ratio has been steadily increasing.
As you can see by the two definitions above, in order for you to be financially well, you have to know how to manage your money well – both now, and into the future. In order to manage your money well, you have to learn and apply financial management skills.
You’ve learned how being financially savvy can improve your financial wellness and that the fundamental cornerstone is what you do with your earnings, versus how much you earn.
Get in touch with your financial planner for tips on how to improve your financial wellness.
Click to see original article by Sarah Bartal, CPA, CA