Today we are a part of a generation that has been multiple calamities in a short period. We are living in a time where everything is uncertain. Jobs, work, business, career has no guarantee. In such a situation, we have to take steps to improve our financial health.
And now the questions arise: what is financial health and how to achieve it? If you are pondering on this question, then this article is for you. Here, the article will talk about the meaning of financial health and steps for financial improvement.
Financial Health Definition
Let’s start the journey towards attaining improving our financial position by learning the meaning of it.
Financial health definition is a state of an individual personal financial situation. In simple terms, it can be said that the word refers to where you stand in terms of the monetary situation. This situation is not the same for everyone. It is different for each individual and influenced by various factors.
The importance of financial health cannot be stressed enough. You need to make sure you stand in a safe place when it comes to money. Stability is the key to a peaceful mind and a healthy life. Yet, not many of us know how to improve our finances. Worry no more; the article will be sharing five simple financial health strategies that you can follow.
Five Rules for Improving One’s Financial Health
Calculate your net worth
Money is not something that comes and goes. For achieving financial health you need to understand your net worth. Net worth lets a person where he is in terms of financial health. Calculating net worth is straight-forward. Make a list of your assets or what you own and list of liabilities or what you owe.
After making a list of assets and liabilities add them up and then subtract your liabilities from assets. The number at which you arrive after subtraction is your net worth. Tracking net worth regularly is very important for the betterment of financial health.
Make a personal budget and stick with it
One best way to get personal financial help to manage your money better is budget. Budgeting is a tried and tested method to keep track of your expenses and save. List out all the expenses that you need to make in a month. And then set aside the money required for these expenses from your income.
This method helps you in achieving short –term and long-terms goals effectively. Knowing how much you get and where and how to spend it is an essential part of financial improvement.
Start managing your lifestyle inflation
It is a common habit among us to spend money on things that we don’t need. This usually happens when we have more income than necessary. Higher positions and better jobs give us a good income. And as a result, we increase our expenses. This process is termed as lifestyle inflation.
It is understood that as you succeed, your career expenses increase like updating the wardrobe, hiring help, visiting families and friends. But keep a check on these expenses. Don’t try to match with your co-workers and friends in the lifestyle for financial improvement.
Prioritize and differentiate between needs and wants
Needs and wants are not the same. You need to understand the difference between these two terms. Needs are such things like home, food, health insurance and clothing, which helps you survive. But wants are something you want to own but not required for survival.
At the same time, needs and wants are not easy to differentiate. The best way to make sure to spend less on wants is by prioritizing. In this way, an individual can develop a habit of spending on needs before wants.
Also Read: Why Financial Planning is Important for Everyone?
Practice saving from day one
Yes, you heard me right saving money also helps in managing your financial situation. Saving money is not done necessarily for your retirement. Retirement is one of the reasons why you need to save. There are plenty of other reasons why you need to save. One such reason for saving money is to protect yourself and the family for unforeseen expenses. This is done by creating an emergency fund.
Also starting to save money sooner gives you more money for the later period. Experts believe that for attaining good financial health 1/3rd of your salary has to be saved. Saving can be done in multiple ways. You can either keep it in the bank for interest or invest it somewhere.
Money is important for every individual. But spending all your money is not advisable. Learning to manage personal finances is the key to success. Always consider the big picture and establish habits that promote financial health.
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