January is Financial Wellness month, and it’s easy to see why when we consider the holiday spending and finance related New Year’s Resolutions we might make.
As business owners you most likely will spend time reviewing and analysing the financial performance of your business. But do you consider the financial wellness of your business? And beyond that do you go that step further and look at your personal financial wellness?
What is Financial Wellness?
Financial wellness is defined as when a person is able to meet expenses and has some money left over, is in control of their finances and feels financially secure, now and in the future. It isn’t about how wealthy you are. It’s about how healthy your finances are, regardless of how much you earn. It’s about understanding where your money comes from and where it goes. It’s about being able to survive a financial emergency, knowing how to invest wisely and having short and long-term game plan.
Personal Financial Wellness
There are many components to personal financial wellness and it can get overwhelming. But a good start is a financial plan. A good financial planner with assist you with this. They can help you map out a plan that includes investment and portfolio management, insurance strategies, estate planning and debt management. The plan is likely to, and probably should, change over time to reflect your goals; life circumstances and the market.
Debt can be a trigger for financial stress, particularly if it is not being managed well. It is nearly impossible to be financially well if you find yourself continuously stressed about interest payments and your level of debt. But affordable debt can be a good tool to help you achieve your financial wellness plan.
There is also an educational component to financial wellness. A recent study by the University of Newcastle found that more than a third of Australians are financially illiterate. It also found that improving financial literacy leads to better financial outcomes, which in turn leads to higher overall life satisfaction.
Business Financial Wellness
For a business to be financially healthy, it must have sufficient cash and liquid assets to continue functioning in its day-to-day operations. It should also have a strategy which is continually fine-tuned and reviewed. You should address areas of concern as a priority, such as unnecessary expenditures.
A solid management team and a succession plan are two vital components of business financial wellness. In a family-owned business often there are only one or two individuals who are essential to the business operations. If this is the case you should have a succession plan to ensure the financial wellness of the business. Other considerations could be “key man” or life insurance to keep the business operational should something happen to the owner of the business.
Over to You
As you can see, there is a distinct difference between personal and corporate financial wellness. Both require holistic wealth management and the incorporation of numerous strategies.
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The information provided here is not investment, tax or financial advice. You should consult a licensed professional for advice concerning your specific situation.