What does financial wellness encompass?

Financial wellness is a comprehensive concept that involves understanding and managing one’s financial situation effectively. It encompasses more than just saving money or having access to credit. The key aspect of financial wellness is finding a balance between financial needs—such as housing, food, and healthcare—and personal wants or desires, all while ensuring that these are aligned with one’s income and financial resources.

This balance is crucial because it allows individuals to create a sustainable financial plan that meets their short-term and long-term goals. It includes budgeting, responsible spending, savings for emergencies, and planning for future expenses without falling into debt. Financial wellness encourages individuals to evaluate what they genuinely need versus what they merely want, ensuring that their financial decisions contribute to overall well-being and financial security.

The other choices do not fully capture the essence of financial wellness. Exclusivity of personal savings suggests a narrow focus, while the ability to make purchases on credit can lead to debt if mismanaged. Additionally, avoiding all financial risks is unrealistic; some level of risk is inherent in making financial choices. Thus, the balance of financial needs and wants with income truly embodies what it means to achieve financial wellness.