8 Ways to Improve Your Financial Health
Improving your financial health is crucial because it can lead to a stable and fulfilling life. When you take control of your finances, you are able make informed decisions and have the freedom to pursue your goals. Remember by starting today you are a step closer to creating a prosperous future for yourself and your loved ones.
Get Started Today With The Tips Below
1.
Educate yourself about personal finance and actually implement that knowledge into your money management, this will provide you with the confidence needed to practice positive habits and develop a routine that allows you to optimize your income, prioritize saving, make informative investments, and lay the foundation for your future.
2.
Identify the current state of your finances by creating a personal balance sheet which is a snapshot of your financial profile that measures your financial position and net worth.
Net worth = everything you own (assets) minus everything you owe (liabilities)
Asset Examples:
-Cash/checking account
-High yield savings accounts
-Financial investments
-Life insurance and retirement accounts
-Real estate
Liability Examples:
-Credit card debt
-Student loans
-Mortgages
-Past due bills
-Back taxes
Knowing your net worth will help you make realistic decisions about what you can afford, view where your money is going, and decide where it needs to be going in the future to secure your future.
3.
Create a financial plan and implement a budgeting system to set boundaries for your financial behavior to help you make informed decisions, prevent overspending and avoid practicing negative financial habits.
Regardless of your income level, budgeting is a tool you should utilize to control your money and work towards your financial goals.
Examples of Financial Goals:
-Increase income
-Build a strong credit profile
-Pay off debt
-Establish an emergency fund
-Compound interest accounts
4.
Monitor your credit profile, not just your score. You want to ensure that you are building a strong financial portfolio to establish your creditworthiness and maintain a good credit history which will show lenders that you're a responsible borrower.
Before you utilize a line of credit or get a loan you should review your budget to determine what you can afford to avoid excessive debt. It is important to only charge what you can afford and borrow only what you can pay back. It is easy to go and max out your credit card but it can be very difficult to repay debts when you are making purchases you can't afford so always be sure to manage credit responsibly.
5.
Maximize your income by constantly looking for ways to boost your earnings and make the most of your money by doing things like eliminating high-interest debt, creating an emergency fund, and putting your money into accounts that gain interest like a high-yield savings account or index universal life insurance policy.
6.
Start investing, this is the act of purchasing assets to generate income and appreciation which is a way to put your money to work and potentially build wealth. Your approach to investing must be tailored around your financial goals so think about why you are investing and develop a strategy that will make your short-term and long-term financial goals achievable.
Investment Examples:
-High-yield savings accounts
-Real estate
-Stocks
-Short-term certificates of deposit
-S&P 500 index funds
With investing you can also optimize your savings by taking advantage of compound interest which allows your original investment to earn interest and then earn more interest when reinvested. This is also called interest on interest which basically means your money is making money.
Example:
You invest $1,000 at 5% interest, and after the first year, you receive a $50 interest payment. Instead of pocketing it, you reinvest it at the same 5% rate. For the second year, your interest is calculated on a $1,050 investment, which comes to $52.50, and your third-year interest will be calculated on a $1,102.50 balance and continues to grow as you contribute and reinvest.
7.
Start reframing the way you think and speak about money. You should be informed, confident, and ready to negotiate if need be. This will allow you to make not only make better financial decisions but also to protect yourself from things like high-interest rates, job clinging, bad investments, and being taken advantage of.
8.
Remember that this is a very personal journey so it is important to define what you want to accomplish before making financial decisions. Budgeting, saving, and investing are only useful if you know what you are budgeting, saving, and investing for. Your journey will not be a straight line but the final reward of a stable and enjoyable life is well worth the commitment.
*We do not claim to be financial experts or advisors so use your discretion when implementing these tips*