Most people take their financial health for granted but it is an important part of a person’s well-being. Financial health is your relationship with your financial and economic resources and how it impacts your physical, mental, and social well-being.
When you have good financial health, this means you have fewer worries and stress.
To have good financial health, financial literacy is needed. Financial literacy is the ability to manage financial resources effectively.
This doesn’t mean that you can afford a luxury vacation or buy expensive things that you are financially healthy. It has more to do with your ability to develop a healthy relationship with money so that you are more in control of your finances. It means that you have more freedom and independence that you aren’t stressed out when it comes to meeting short and long-term goals.
It may take a lot of time and patience to be financially healthy, but having good financial health is possible. You can make it happen by following these simple tips.
Know Your Need and Wants
It is a lot easier to make guilt-free spending choices when you know the difference between your needs and wants. Think about your priorities first and what are the things you need to survive such as food, shelter, transportation, and healthcare. We can consider clothing a need, but spending too much money beyond your budget may become a want. Moreover, don’t forget to have savings as it is one of your “needs” to survive.
Create a Budget and Stick to It
Budgeting and financial health go hand in hand to improve your financial well-being. Your budget tells you where your money is going. To set a budget, create a list of the purchases you made on a daily, weekly, and monthly basis. Then, figure out the spendings you have done and identify which are your wants and needs. Is there anything you can take out on the list?
Do Not Spend More Than You Earn
It may be difficult to follow this rule particularly if you don’t get paid a lot. However, imagine how harder it would be if you spend more than you earn. Living beyond your earning capacity won’t lead anywhere. Live within your means and stick to your budget.
Pay off Your Debts
Credit cards often have high-interest rates which can be a bummer if you plan on improving your financial health. But this is one of the things you need to improve your finances. Make it a point to gradually reduce your debt. Start by paying your credit card debt with a high outstanding balance and high-interest rates first. Then reduce your debts by consolidating your card balances into one card or better if you pay them off one at a time. The important thing is that you can pay off all your debts so that you can focus on saving more money.
Automate Your Savings
Building your savings is one important factor in improving your health. However, it is easier said than done. It is not always that easy to set aside a certain amount of money for savings particularly when you have a lot of expenses. Therefore, you need to stick to the rule of paying yourself first. Paying yourself first means that you have to put for savings first before everything else. The best way to do this is to have a certain amount of your paycheck automatically deposited into your bank account. In this way, a portion of your salary is automatically saved before it is spent.
