Hi, everyone! I’m going to be sharing with you today how to make your finances better. I’ll share with you 6 ways to do so. First things first: What is “financial health,” and why is it important? Financial health is the state of having enough money to achieve your personal goals. Sound good? Let’s continue then…
What is “financial health” and why is it important?
Financial health is a measure of your current and future economic well-being. It’s not just about how much money you have but also about the quality of your choices and behaviors around personal finance.
We define financial health for a person or family as the ability to:
- Spend less than you earn
- Save for emergencies and retirement
- Affordably borrow when needed
- Manage debts efficiently
- Pay bills on time and in full
Why is it important?
It’s no secret that the vast majority of Americans are struggling with their finances. The average household carries $137,063 in debt and has only $11,700 in savings. That’s a problem because most of us live paycheck to paycheck, making it challenging to handle unexpected expenses, let alone save for retirement or our children’s college education.
The good news is that you can do things right now to improve your financial problems — even if you’re deep in debt or have no savings. We’ve created this site to help you better understand your financial situation and provide you with resources and tools to help you make better decisions about your money.
Tips for Your Financial Health
Managing your money may not seem like the most fun thing to do, but we’re here to help. We’ll walk you through how to:
Start a budget
If you don’t know where your money is going, it’s impossible to spend it wisely. Budgeting lets you take control of your finances by identifying areas that need improvement and finding ways to make adjustments to reach your financial goals.
Cut back on unnecessary expenses
One of the best things you can do for yourself financially is to cut out nonessentials from your budget and put that extra money toward your goals or savings. The trick is identifying luxuries that aren’t necessary and don’t add meaningful value to your life.
Build up an emergency fund
An emergency fund helps protect your finances from unexpected expenses like car repairs or medical bills, so you’re not forced to take on debt or dip into retirement accounts to cover basic costs. Ideally, the fund should cover at least three months’ worth of living expenses in case of job loss or other financial shocks.
Pay down debt
Debt can be a valuable financial tool if it gets you something you need and increases your net worth. If the debt is for something that decreases in value, like a car or vacation, it’s not worth the cost. Credit cards are an excellent debt tool, but you need to stay on top of payments and keep the balances low.
Build a long-term plan for retirement
Retirement planning isn’t just about money; it’s also about lifestyle and health. If you’re 40 years old with a new mortgage and two kids in college, you may think it’s too late to start saving for retirement. It’s not! Even if you don’t have enough to retire when you reach your goal age, you’ll be much better off if you start now than if you wait until later
Build healthy savings habits for the future (automate your savings)
Some things happen in life that is out of our control: job loss, illness, natural disasters, etc. You need an emergency fund to cover the unexpected expenses in life — ideally three to six months of living expenses.
Summary: Tips for Your Financial Health
The first step in achieving financial health is to take charge of your finances. It may seem daunting, but it takes just a little know-how to get started. Research shows that Americans are very aware of the need to save more and pay down their credit cards, and hopefully, these tips will help you take the first step towards financial health today.