You may have reevaluated your finances recently due to the current state of the world, or you may realize it’s finally time to be an adult and start taking your money seriously.
If that’s the case, this article will help you. It doesn’t matter where you’re starting from. Regardless of your financial situation, the principles in this read apply to everyone.
Financial health means different things to different people. But it generally refers to having enough money in the bank to absorb a financial setback, being able to meet your monthly financial obligations, and being on track to meet your financial goals.
You might benefit from taking a few steps to improve your financial health and habits if you find yourself worrying about money often or without much of a plan.
Budgeting for the Month
It’s a known fact that most of us leave our monthly cash flow to chance and hope that it all works out.
If we take the time to run the numbers, however, we can ensure that our spending is within our means, that we’re prioritizing our spending based on our goals, and that we’re working towards a healthy financial future.
Having a budget can ease financial stress by making spending decisions easier. In the likes of reducing eating out, using coupons, and not spending unnecessarily, a budget can help you spend less.
Putting together your last few months’ financial statements and receipts is one way to start a budget. Once that is done, make a list of all the money that comes in (income) and all the money that goes out (spending).
Sort expenses into categories and then separate them into essential and non-essential. This will be of great help in managing and prioritizing your expenses.
Now you need to figure out your average monthly income (after taxes) and your average monthly spending.
Take a close look at your spending to see if your expenses exceed your income or if you have a little leftover for savings.
Repaying the debt
Keeping track of how much you owe is essential to achieving financial health. To get a better understanding of how things stand, you can access your credit report.
High-interest credit cards and consumer loans can harm your financial health because they make it difficult to meet your monthly expenses and save for the future.
CreditNinja can help you in calculating your debt-to-income ratio, as well as your total debt. This will help you visualize how much money from your total income will be required to reduce your debt.
Plan for an emergency fund
You easily turn a car problem into a money problem by pulling out a credit card when your car breaks down. As the interest compound, the money problem will become more stressful and worrying. You aren’t doing your financial or physical health any good with that.
If you have money set aside for emergencies, you can get things done. Fortunately, your emergency fund will protect your finances.
At times, it can be difficult to work toward building this up, but by making it a priority, you’ll get there. It’s best to set up an emergency fund of $1,000 as a starter. That amount will cover small expenses while you’re paying off your debt. Once you pay off your credit, you can start saving more.
Automate your savings
It can be overwhelming to tackle financial health, and it’s unlikely something you want to think about all the time.
An excellent way to improve your financial health is to save at least something every month.
By doing this, you’ll simply be transferring money automatically from your checking account to your savings account each month on the same day. You won’t get a chance to spend that money if you’ve scheduled it to happen right after your paycheck clears.
You can start small if you want to. It’s better to save a little than nothing at all, and over time, the small deposits will add up if the transfer takes place every month.