Just like our physical and mental health, financial health also plays a key role in our overall development and well-being. A good combination of physical and mental health helps keep a person fit for tasks, and even challenges that might come.
Similarly, good financial health is a must in today’s modern world, where financial stress, indecisions, and lack of financial knowledge are deteriorating the financial conditions of people.
With good financial health, there will be no doubt that people will be in complete control of their finances. They can take many important life decisions which weren’t possible earlier.
A key step would be to build your financial health from the ground up, just like the structure of a well-built home!
Pillars of Financial Health? What’s It All About?
You can take inspiration of bettering your financial health from a nearby construction site. No, we’re not kidding!
You can go to a construction site and watch that behemoth thing take shape through bricks, steel, wood, cement, etc (keeping a safe distance, obviously), or you can watch it take shape through a window, all from the comfort of your office or workspace!
There’s a pattern that you will begin to notice. Every work in progress building starts with making the foundations strong, i.e. with no proper base, a safe and well-built project is not possible.
Okay, so let’s move on from real estate, back to the real world of finance!
Your journey to your best financial health also begins from strong foundations. If you are serious about your financial health, you need to start building strong pillars for these financial elements: Spend, Save, Borrow, Plan.
A budget is required to spend wisely. You can create a clear budget to alter your spending habits with a little time and effort. Budgeting advice is readily available on the internet, and you can also download tools and apps to help you automate the budgeting process. The key is to stick to your budget, regardless of the method you use to budget. That involves adhering to good spending habits in order to stay on (or, better yet, under) budget.
Each individual should be saving each month, but life’s realities sometimes make this tough. In general, you should try to save at least 10% of your monthly earnings. If that isn’t an option, any amount saved will help you improve your financial situation. Those funds should be regarded as untouchable once you begin saving.
They’re not for paying monthly payments or making spontaneous purchases. Instead, they should be utilized to start saving for an emergency fund and larger savings account for long-term goals. Having these funds on hand will prevent you from putting these costs on your credit cards.
Debt payments should not exceed 15% of your income in a healthy situation (not including mortgage and transportation loans). Keep in mind that larger debt payments may suggest that your debt load is no longer manageable and, as a result, unhealthy.
While credit cards have benefits, such as improving your credit score or providing rewards for on-time payments, they can also be risky. Paying down debt quickly should be a goal if you have more credit card debt than you should.
In five years, where do you see yourself financially, and where do you wish to be? Those are important things to consider as you plan for a secure financial future. Spend some time imagining how you want your life to be in the future: Do you require funds for your retirement? Do you wish to be able to purchase a home or a rental property? Will you have to assist a child with college expenses?
These questions are relevant to your objectives and what you’ll need to do (or modify) to achieve them. You can begin to re-prioritize your budget in ways that make sense for your goals by focusing on long-term goals rather than monthly spending.
Bottom of the line
The important thing to remember is that once you have all four financial well-being pillars in place, you suddenly have options; rather than your finances buffeting you back and forth throughout your life, you are much more in charge of your financial future.
Download FinMapp to start your fruitful Financial Journey!