Financial health refers to having a relatively worry-free, peaceful, and happy relationship with your money. Usually, those who have good financial health have the following four components in place: their income covers their basic living expenses; they are able to make their loan payments regularly; their debts are paid off easily; and they have financial goals and plans in place. There are many other factors that go into one’s financial health. However, these four elements, taken together, ensure the stability and future growth of one’s finances. If any of these elements are missing or poor, then one’s financial health is adversely affected.
It’s important to maintain monthly savings, even after you reach middle age. Most adults should set aside five percent (5%) of each paycheck for retirement savings. A saving account should be used to build a nest egg for your later years. It should be a place to store your kids’ college funds, your education funds, and even your “rainy day” cash. As you get older, you can begin upgrading your home or contributing to your children’s college funds.
In order to achieve financial well-being, you need to be disciplined about your money. Keep your checking and savings accounts in the best of fashions – always with the latest interest rates, no fees, and only in your best interest. Don’t let the world around you dictate how you should spend your money! By creating and sticking to a budget, you will learn to be disciplined about your spending.
You need to have an emergency fund. Establishing an emergency fund is not a sign of financial well being. But keeping it in place is imperative to long-term financial goals. For starters, most banks only contribute to savings if the account holder has a job. Therefore, unless you are working, you will have to save for your own emergency fund.
You must also learn to budget. The most important aspect of establishing and achieving financial wellness is getting control of your finances. Once you are able to do this, you will then be ready to set financial goals and take the necessary steps to reach them. If you have a personal computer, you will probably find it very easy to keep up with your monthly financial goals. Most computers come with a free online financial tools that make budgeting easier. And you don’t have to be a computer genius to use these tools; anyone can do it.
If you are a stay-at-home mom, or a retiree, you need to establish a lifestyle budget. Your lifestyle budget will consist of all of your expenses as well as any extra income that you generate. As mentioned earlier, most banks only contribute to savings if the account holder has a job. Therefore, unless you are working, you will need to save for your own emergency fund. This way, you will be able to meet your day-to-day finances without much financial stress.
In order to successfully manage financial wellness, you will need to open a savings account and invest in a high-interest certificate of deposit (CD) or money market account. By building up savings, you will be able to pay off any debts and live a debt-free life. However, you will not be able to rely on your savings account alone. You will also need to build up a long-term debt management strategy in order to eliminate your debt as quickly as possible and without accumulating more debt.
Regardless of your situation, you may want to consult with a professional credit counselor in order to determine if you have too much money going out each month. If you do, you may want to consider getting a debt consolidation or debt counseling. Debt consolidation allows you to combine your high interest credit cards and other lenders into one loan, which usually has a much lower interest rate than your current bills. If you have enough money to repay your debts in full and you are living within your means, you should definitely get credit counseling.