Financial health refers to the state of your overall money situation. It includes everything from how you manage your bills, your ability to save for the future and the amount of debt held in your name. As is to be expected, some people have better financial health than others, but it is worth spending time developing and learning more about your finances and future financial goals to make sure that you are on the right track in reaching these.
Building your financial health is a great way to improve your overall outlook on your money management skills and financial awareness. Still, it can also help improve your overall health and wellness by removing the stress that is often associated with financial management. Let’s take a look at some of how you can build long-term financial health.
Improving Your Financial Health
In order to improve your financial health, the first step to take is looking at where you currently are. From here, you can start building on weaker areas of your finances and put a plan in place for the next steps.
Get To Grips With Budgeting
Creating a budget, and sticking to it, is one of the tried and tested ways of better managing your finances. It’s not enough to just plan where you’ll be spending, but it’s important to look closely at where you are already spending your money. There may well be areas where you can cut back. Recurring subscriptions are one of the most common instances where people are spending more than they are budgeting for, particularly outdated or no longer required subscriptions.
There are many different ways in which you can create an effective budget plan, depending on what works best for you. It might be that you’re better suited towards using an app which will connect with your bank account, or perhaps you’d prefer to use and regularly update a standard spreadsheet. The envelope method is another popular budgeting method, which is where you create an envelope for each budgeted item, such as food shopping or bills, and keep the required cash in the designated envelope.
One of the keys to successful budgeting is sticking to your budget, regardless of your income or lifestyle desires. If you begin to deviate from your budget, then you will find that you might begin overspending.
Building An Emergency Fund
We never know when an emergency will strike, so it is important to have some money which can be used should one occur. This will not only help your financial health situation, but it also means that you don’t need to worry about having the money as and when an emergency occurs, which could be sudden car repairs or changes in your employment. Some people have the aim of saving between three to six months of budgeted living expenses, however, this is something which might not be easily achievable for everyone so be sure to save what you can afford.
Reducing Debt
There are two popular methods for reducing and paying down debts – the snowball and avalanche methods. The snowball method is where you pay off the smallest amount of debt first, before working your way up to the larger debts. With the avalanche method, this is where you would pay as much as possible towards the debt with the highest interest, whilst ensuring to pay the minimum amount on the other debts held.
The Next Steps
Financial health involves a lot of different areas and factors of your finances, as well as personal management and organisation. The money habits which you build now will work to boost your financial security and lower levels of stress. As well as this, you can also set long-term goals which you might find to be motivating and allow you to get a better grip on your finances. If you are finding that managing your finances is getting too much to handle, or is becoming overwhelming, then reach out to a financial debt advisor for guidance.
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