Six smart ways to help boost your financial wellness

When you’re juggling competing financial priorities, figuring out how to manage your spending, saving, and investing can feel overwhelming. Fortunately, taking a few basic, but important, steps can help you get a handle on your money today and put you on the path to financial fitness in the future. The most fundamental steps toward financial wellness include establishing a budget, managing cash flow and debt, building your emergency fund, and putting some automation in place with your savings.

Financial wellness is the process of developing healthy financial habits and being at peace with your finances, both present and future. It could include budgeting, eliminating debt, and investing.

Taking the following six steps can help reduce your stress and get you started.

The first step toward achieving your financial goals is knowing where your money is going. A budget gives you the opportunity to make sure your saving and spending match your priorities.

There are plenty of ways to prepare a budget. You can use a spreadsheet or pen and paper, and there are also apps and programs available to help make the job easier. Whichever way you choose to build your budget, you will want to list your monthly expenses, including fixed expenses such as your mortgage or rent, student loan payments, phone, and internet; variable expenses, such as groceries, entertainment, and travel; and irregular expenses like some health care expenses or home repairs.

When you make your budget, be sure to include your savings goals. It makes sense to pay yourself first—that means prioritizing savings goals as part of your essential monthly expenses.

A budget should also include a plan to reduce any debt. T. Rowe Price research shows that debt is a key driver of financial stress and often derails long-term savings goals.¹ First, make the minimum monthly payments on all your debt. Then target high-interest debt, like credit card balances. You may need to make short-term adjustments to your savings and spending plans while you take care of existing balances.

Once you have a clear picture of your expenses, compare your spending with your income, and consider any changes you may want or need to make. After you set your budget, you should monitor your spending regularly to ensure that you’re staying on track to realize your goals.

When it comes to financial fitness, one of the most important steps you can take is creating an emergency fund. Set aside cash in an emergency fund so that you can deal with life’s unexpected events without derailing your budget or long-term savings strategy. T. Rowe Price’s 2023 Retirement Savings & Spending¹ survey found that about half (49%) of surveyed 401(k) savers stated that saving for emergencies was a major objective.

How much do you need? While you are working, T. Rowe Price recommends that you set aside at least $1,000 for emergencies to start. Then build up to an amount that can cover three to six months of expenses. If your income is less predictable—such as with freelance or commission-based work—you may want to set aside enough to cover at least six months or more.

While investing can be a powerful way to potentially grow your savings, you will want to consider keeping your emergency fund in a savings, checking, or money market account. These accounts can offer you lower-risk investing and easy access to these funds when needed. If you need to use your emergency savings, make sure you work on replenishing your fund afterward.

One of the best ways to help stay on track with your saving and investing plans is to make your contributions automatic. Automation saves time and doesn’t require ongoing work, so once you set it up, you can make progress toward your contribution goals without any extra effort. It also helps remove the emotions from investing, helping you stick to your plan despite market ups and downs. (See How automated investments can grow over time.)

Sticking with your plan through short-term market volatility can help you, through a process called dollar cost averaging—buying more shares when prices are low and fewer shares when prices are high. Dollar cost averaging can reduce the average purchase price for stock shares during times of volatility or down markets. Accumulating more shares when the price is lower means benefiting when the market and the price of the investment rebound. This method, however, cannot assure a profit or protect against loss in a declining market. Investors should consider their financial ability to continue purchases through periods of low and high price levels. (See Investing on a regular basis.)

Automation also removes the temptation to spend. The money is routed to your goals before you become distracted by tempting purchases.

You may already take advantage of an automated savings plan through a workplace 401(k), 403(b), or other retirement account. You can also automate contributions to other accounts, such as individual retirement accounts (IRAs) and taxable brokerage accounts. For example, with T. Rowe Price Automatic Buy,² you can establish regular monthly payments to existing retirement, general investing, or brokerage accounts.

When it comes to your retirement goal, saving as much as possible and starting as early as possible can be keys to success. T. Rowe Price analysis suggests investors save about 15% of their income, including any employer match, over the course of their working career. According to T. Rowe Price’s 2023 Retirement Savings & Spending¹ survey, only 40% of respondents think they are saving enough for retirement, down from 45% in 2022 and 49% in 2021. The median contribution amount was just 6% of salary.

If you fall into this category and you cannot get to 15% right away, it’s important that you at least try to contribute enough to get the full employer match and then steadily increase your contributions over time. (See Saving early can make a difference.) Many workplace plans offer a service that will automatically increase your retirement contributions by one percent or two percent each year. Because the increases are small and incremental, you might not even notice you are saving more, but doing so can potentially make a big difference over time. If auto-increase options aren’t available or you’re investing outside your 401(k) plan (in an IRA, for example), then schedule gradual increases into your savings plan yourself—making sure you stay within any contribution limits.

You don’t need to figure out your financial life on your own—there are lots of ways to get help. For instance, many employers offer financial wellness tools and education programs to help their employees define goals and identify concrete incremental steps to achieve them. Some employers offer important financial support, including matching retirement contributions, student loan repayment, tuition reimbursement for additional education, and other benefits.

Your employer is not your only option. Many financial companies, including brokerages and banks, offer free online tools and education. You can also gain perspectives on T. Rowe Price Insights to help inform your financial journey. Financial advisors can help with everything from creating a financial plan to ongoing investment management.

When it comes to building savings and paying down debt, coming up with the money to achieve your goals can be difficult. How much you earn is a key part of your financial outcome, so it makes sense to consider your income as part of your overall plan.

You may be able to increase your earning potential. Investigate additional education to improve your career prospects. Many employers offer training programs or tuition reimbursement to support your ongoing education. Some people boost earnings with side gigs, second jobs, or small businesses. Finding a way to make more money may not be easy, but doing so may help decrease stress and increase your financial self-determination.

Financial wellness is a process that should last a lifetime. Starting with these six steps and revisiting them periodically could help you on your way to a stronger financial position, less stress, and realizing your financial goals.