We know your health matters, and we’re pretty sure you do your best to keep it in the most optimal condition.
But what about your financial state, or more specifically, your “Financial Health”?
Puzzled? Well, let us give you a lowdown on why good financial health is the need of the hour.
Your present financial status, including your credit, debt, savings, assets, and income, is referred to as your financial health.
Although this idea focuses on your financial situation, it has far-reaching ramifications because the stress of having a bad financial situation might end up impacting both your physical and mental health.
Being financially sound entails having the means to cover both anticipated and unforeseen expenses. A person who is in good financial health can afford to pay their debts, has enough funds for an emergency, and can pay their vital costs. If your financial outlook doesn’t fit this description, you might need to make some improvements to it.
Financial well-being can change from person to person and can either get better or worse over time.
The condition of a person’s personal financial circumstances is referred to as their financial health. Knowing how financially fit you are is the goal of financial health.
Importance of financial health
Financial stability is crucial, and stress is a result of financial instability. If you can’t take care of yourself, it will probably manifest itself in your relationships in both overt and covert ways. You have very little freedom if you can’t make plans for the future. That is ultimately what financial health is all about.
A personal financial assessment helps you develop strategies and make wise investment decisions by letting you know what debts and assets you currently have.
A good financial health brings these benefits for you
Less Stress – Stress related to money has only been worse since the pandemic started. You may lower your overall stress levels by maintaining your financial health and wellness.
Stress over money can affect your family, relationships, and career planning, among other aspects of your life. You may lessen your stress by making investments in your financial wellness.
Work Life Balance – If you’re having trouble making ends meet at the end of each month, it’s likely that you’re making trade-offs in other areas of your life in order to make more money.
Gaining financial stability can provide you greater freedom to pursue your passion. You can achieve balance between your life and your career so that you can give your attention to what important to you.
Steps to become financially healthy
Having enough insurance to protect your family, setting up an emergency fund, establishing a solid credit history, controlling expenses, and disciplined investment in your short-, long-, and retirement-term goals are just a few examples of the various components that make up your financial health.
The parameters listed below are where you can concentrate to improve your financial health.
The first step to financial health is budgeting. You can achieve financial stability, keep track of your spending, pay your bills on time, accumulate savings for unexpected expenses, and reach your financial objectives by adhering to a budget.
An emergency fund is a safety net that can assist you in coping with unforeseen events in life, such as the loss of a job or any monetary difficulties.
Risk management is done through insurance. When you purchase insurance, you give the insurance company the financial burden of a potential loss in exchange for a payment known as the premium. The two basic types of insurance are as follows:
Health insurance will give you the much-needed financial protection because health hazards and medical crises can come at any time.
The welfare of your family should be your priority when purchasing term insurance. In the event of your absence, a term insurance plan will ensure the financial security of your family.
Put Money Into Savings
Purchasing assets that appreciate in value over time and offer returns in the shape of income checks or capital gains is the practise of investing.
Always take out loans that are feasible and consider the repayment scenario. Never allow your EMIs to exceed your income.
“Net Worth” is the sum of all the aforementioned financial factors.
Your net worth, which indicates whether your total assets are worth more or less than your total debt, is a reliable predictor of your financial well-being.
You naturally want your net worth to be on the positive side of the balance sheet, meaning that you are worth more than you owe, as this is a sign of good financial health.
Your assets, for instance, would include things like your home, car, furniture, jewellery, and other items with inherent value. Then you must deduct everything you owe, including credit card debt, school loans, house payments, auto loans, and other debts. Your net worth is the difference.