According to Tom Rath and Jim Harter – financial wellness is “effectively managing your economic life”, the gentlemen are well known for their leadership in workplace wellbeing research at Gallup.
Financial wellness is a derivative of financial security, that is, acquiring the ability to meet your current and future financial obligations. Financial wellness also sometimes referred to as financial wellbeing, is having a financially independent healthy life. The intricacies of financial wellness begin with segregating your wants and needs. The implementation of a flowchart differentiating the two helps you in controlling your expenses and restricts you from frivolous spending, indirectly assisting you in taking the first step towards financial wellness. A change in your financial behavior towards the right direction will enable you to sustain your quotidian financial situation and construct a concrete foundation upon which you can build your financial future.
One of the most prominent concepts in finance is discounting the future cash inflow or outflow to its present value today. The financial wellbeing of an individual may be judged from the following two instances:
A persons’ ability to control day-to-day expenses, maintain a month-to-month ledger to keep track of finances, and live with frugality. Significant control over the urges and wants will enable one to have the capacity to absorb any unforeseen financial shock that may arise due to unprecedented circumstances.
Financial wellness is also defined as the freedom to make choices that require extravagant spending. These may be essential for one to enjoy their life and pursue their daily extracurricular activities, at the same time discounting the future cash flow requirements that must be kept aside for them to pursue their long-term financial goals.
To promote financial freedom and financial stability across a wide spectrum of participants, we need to adopt the pillars of financial wellness and strive to make it affordable and available to all. The pillars include:
Availability to all: As stated above, financial wellness must be made available to all sections of society. It should be non-exclusive and offered to everyone working within that organization.
Accessible at any time: Requirement of funds can arise at any point in time. Emergency or shortage of funds can lead to financial stress for an individual and can deter them from meeting daily financial needs. This can lead to counterproductivity at work and in personal life. Therefore, to prevent such circumstances, timely access to funds must be guaranteed around the clock with minimum formalities and procedures.
Benefits of insurance: To safeguard oneself from serious financial pitfalls, one must understand the benefits of insurance. Employers must highlight the advantages of health and life insurance to their employees.
Allowing organizations and employers to remain debt-free: Financial wellness allows their employers to remain debt-free by assisting them in efficiently managing their working capital requirements. It prevents employers from having to tie up their funds excessively into a line item on their balance sheet.
Promoting financial literacy and financial education: A strong financial education enables you to possess the required skills needed to make informed decisions to allocate your financial resources. As one has rightly said, “Preserving wealth is more important than creating wealth”.
Inculcating a healthy habit of saving and investing: A good savings habit makes an individual feel secure and better about the money in their bank account. After having sufficiently provided for your daily finances, it becomes extremely important to develop a habit of routinely investing the surplus liquidity. With a disciplined approach towards investing at regular intervals into instruments with a healthy payout of interests and dividends, one can look to create wealth over time and a sizeable corpus at retirement. The returns from these investments will help you beat the rising expenses that cause a reduction in the purchasing power of money.
With input costs surging and inflation climbing, financial wellness finds itself more important than ever. Every passing day in the competitive world demands extraordinary focus. Hence, to help individuals unleash their full potential and keep the worries of a financial crunch at bay, we at FatakPay provide credit facilities through our mobile app. We aim to cater to a broad spectrum of participants. Credit availability through the traditional system of banking to individuals with a stream of lower-income is scant. At FatakPay, we challenge this existing premise by providing interest-free collateral-free credit to anyone that is in need. Our app helps users keep track of your spending habits and our software can also be integrated by using the Application Programming Interface (API) for corporates and organizations. We understand the need for an integrated financial system management and strongly believe that financial wellness must seep deep into the roots of our country to enhance prosperity and the ease of living in India.
