The start of a new season is a good time to make sure one’s finances are in order. After all, a recent Pulse of the American Worker study reports that nearly seven of 10 employees worry about their financial security.
To help get and stay on track, the following is a comprehensive and easy-to-follow guide for investors and others seeking to understand and improve their financial wellness, and thus their life quality.
Financial wellness can be defined in part by what it entails, and that is every aspect of one’s finances and how, together, they affect their mental, physical, and social health.
Financial wellness is not a goal as much as it is an ongoing journey of tweaking goals and, when necessary, pivoting altogether. Building and maintaining financial soundness and equilibrium can keep the bills paid, but even more than that, promote stability, health, and life success.
However, too many people still have problems paying bills, have insufficient emergency and long-term savings, have no investments, and are not fully prepared for retirement. Having said that, a person’s financial wellness is unique to their particular goals and where they are in life.
While everyone’s goals and journeys are different, there are fundamental components of financial wellness, including:
Financial wellness is not just about money. In fact, financial health is a vital part of one’s overall wellness. Taken together, the facets of a person’s financial state determines individual financial health. In turn, that affects every aspect of a person’s wellbeing.
It is important to establish financial goals, but make sure they are realistic and achievable. Otherwise, they could lead to self-defeat and discouragement. First, though, there are questions to be answered, such as how much has been saved for retirement to date? If that amount is insufficient, is there a plan to save more? Are employer-sponsored retirement plans being taken advantage of? Is there an individual retirement account set up?
While retirement is being singled out here, it illustrates how setting and working toward short- and long-term financial objectives are a key part of gaining all-around financial wellness.
A person’s car broke down, a vehicle that is not only used for transportation to and from work, but it is often needed during work for employer errands, etc. If the car wasn’t repaired right away, the employee likely would have lost their job. Instead, the individual acknowledged early on the possibility that their aging vehicle may require sudden repairs. So, instead of buying an expensive fancy coffee each month, he set aside that money in preparation. Then when he did need work done, he could pay for it – and without going into debt.
Another individual had a suddenly ill relative who lived a flight away. Had the person not been diligently saving, the lack of money likely would have stood in the way of them being able to travel. Because they had an emergency fund, they were able to attend to their loved one.
Those who achieve financial wellness also gain the peace of mind that accompanies the assurance that they can pay their bills, handle emergencies, and manage their monthly expenses. They also are able to put money away for long-term goals and feel confident about their future. If financially healthy people experience a financial setback, they bounce back because they have the appropriate resources and plans in place.
These are perks that are, as is said, “priceless.”
There are practical tips and methods for improving one’s financial wellness, including:
Alternative investments can be a good way to help accomplish this.
Traditional portfolio asset allocation envisages a 60% public stock and 40% fixed income allocation. However, a more balanced 60/20/20 or 50/30/20 split, incorporating alternative assets, may make a portfolio less sensitive to public market short-term swings.
Real estate, private equity, venture capital, digital assets, precious metals and collectibles are among the asset classes deemed “alternative investments.” Broadly speaking, such investments tend to be less connected to public equity, and thus offer potential for diversification. Of course, like traditional investments, it is important to remember that alternatives also entail a degree of risk.
In some cases, this risk can be greater than that of traditional investments.
This is why these asset classes were traditionally accessible only to an exclusive base of wealthy individuals and institutional investors buying in at very high minimums — often between $500,000 and $1 million. These people were considered to be more capable of weathering losses of that magnitude, should the investments underperform.
However, Yieldstreet has opened a number of carefully curated alternative investment strategies to all investors. While the risk is still there, the company offers help in capitalizing on areas such as real estate, legal finance, art finance and structured notes — as well as a wide range of other unique alternative investments.
Investing and investment knowledge are key components of financial wellness, which is key to long-term quality of life. Such wellness ultimately comes down to feeling secure about one’s financial future. There are a number of tips and methods that can help with the journey.
Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.