Achieving financial wellness is akin to maintaining a regular balanced diet. It is the backbone of managing your finances and is critical to conquer financial hurdles.
If you are the type that wings it month to month, you definitely could use financial discipline to better structure your money habits and improve your financial health.
While you might think that good financial habits are hard to adopt, creating financial wellness is a practice that can be embedded into your lifestyle to enhance your overall financial health in simpler than expected ways.
Here are 4 foolproof ways to improve your financial wellness and keep you on track towards impenetrable financial health.
Know Your Pluses and Minuses
Your first financial goal should be to know exactly what your income is and what your expenses are each month. You shouldn’t be in the dark when it comes to how much you’re making and how much you’re spending. Calculate your total assets and debts, and make a plan to rebuild if your net worth is negative.
Once you’ve reviewed your pluses and minuses, make a list of which expenses are needs versus wants. Make a conscious decision to spend mindfully going forward, not to restrict your lifestyle, but to safeguard your future financial stability.
Find ways to budget better without penny-pinching so that fine-tuning your spending feels rewarding instead of boring and burdensome. Even if you’re soon to be making more money, avoid increasing your spending as that contributes to a cycle of mismanaging lifestyle inflation.
Ideally, your pluses should outweigh your minuses. Your income should be able to comfortably cover your expenses and contribute to your savings and investment accounts on a monthly basis.
Put A Dent In Debt
Conquering your debt first requires a plan. Will you plan to earn more or spend less to accelerate your payoff?
No matter what you decide, don’t be in the dark about the interest rates on your debt. Write down the interest you are paying for your debt and the outstanding time it would take at your current pace to pay it off.
Remember, lenders determine interest rates and borrowing amounts based on your credit score, so keep an eye on your credit score health. If it’s currently in bad shape, you can improve your credit score by making consistent, on-time payments.
Improving your credit score will significantly benefit your financial wellness and help you secure favorable rates for future borrowing.
Kickstart Investing
Though investing is risky, not investing can be even riskier. If you’re unsure of where to start, talk to a financial advisor to explore your investment options based on your age, your financial goals, and your risk tolerance.
You can also self-educate and do you due diligence about the stock market, bonds, REITs, and all of the investment options available.
Create an investment portfolio that your future self will thank you for later.
Create (and Maintain) Your Emergency Fund
Creating an emergency fund will preserve your financial resiliency by preparing you for any unexpected expenses that life may throw your way.
Such emergency funds will shield you against life uncertainties such as costly medical bills or job loss.
Your emergency fund should have at least 3-6 months of income for unforeseeable worst-case-scenario emergencies.
And if you withdraw or empty it, make sure to save to rebuild it.
The Takeaway
Prioritizing your financial health is essential for a comfortable and secure future. Make sure to:
- Monitor your income and expenses, and use your budget as a framework to spend wisely.
- Keep debts at minimum and be cognizant of interest rates.
- Create an investment portfolio that fits your risk tolerance.
- Always plan (and save) for unexpected emergencies.
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