Keeping Up With Your Financial Health
When we think of health, often we look at our diet, our body, our minds, and maybe even our relationships. But health can extend to much more than just those aspects. One component we don’t often think of when looking at health is financial health. In a recent study, 80% of Americans were reported to be in debt. Financial health is an overlooked and undervalued form of health. Crippling debt can have effects far more severe than simply owing money. It can affect wellbeing, jobs, housing, and even relationships. Being in control of your finances and maintaining your health is a key component in being holistically healthy yourself.
Aides to Financial Health
Pay Off Loans
Loans are a common debt that many people find themselves in. There are many different types of loans, each with its own purpose. And while loans sometimes can’t be avoided, there are smart ways of borrowing money. Often people need loans to cover unforeseen expenses like home repairs or hospital bills. There is no shame in needing to take out a loan in order to make a payment. This being said, once having taken out the loan, paying it back becomes crucial. Because loans accrue interest, the more you wait to pay them off, the more you end up having to pay. When looking at your monthly budget, calculate a spot that you can take money from comfortably. It is important that you choose an area that you’re willing to cut down on. If you try to save money by sacrificing expenses you really care about, then you’ll probably end up putting saving on the back burner. After finding this sum, calculate how long you need to save to pay off the loan and determine the interest. This way you have a clear snapshot of how you will need to pay off the loan. By sticking to this, you know you will be able to get rid of this debt on a timeline.
Set Up An Emergency Fund
Emergencies happen. But you can be prepared. One of the best ways to avoid a major financial setback is to have a fund set up for the unpredicted expenses. Financial experts recommend having enough to cover about 3 to 6 months’ worth of expenses saved in an emergency fund. While this may seem daunting, it is important to just start saving. You don’t have to save everything at once, you just need to start. Try to follow a sustainable savings plan that you know you’ll stick to. Try creating a monthly saving goal to keep yourself on track. You can set up an automated money transfer of the amount you want to save every month so you don’t even need to think about doing it yourself. Streamlining the savings process will help motivate you to keep going. Saving shouldn’t be a frustrating experience. While it does take discipline, a proper budget shouldn’t feel unachievable.
Evaluate Needs Vs. Wants
The timeless debate in the savings world is “needs vs. wants”. Deciding what you need to spend money on versus what you want to save money on is the key to creating a proper budget. “Needs” refers to unavoidable expenses. This normally includes rent, utilities, health insurance, car payments, gas, and other payments that are necessary. Establishing the total sum of your “needs” gives you a foundation for budgeting. Once you know this number, you can decide what amount of money you can afford based on your “wants”. Ideally, you want to make room for at least some of your wants. If you restrict yourself too much on spending you find that you will have moments of massive overspending. By creating a set amount of money you can freely use, budgeting won’t feel like such a restriction.
There are things we all want to save for. Maybe it’s a big trip, a new car, or something new for the home. Effective saving happens when you’re consistent. But being motivated to save is no easy feat. There’s not much to incentivize you to save by simply transferring money from one account to another. A common strategy that many people use is finding a way to visualize your savings. By having a tracking method that you can see, you will feel more motivated to maintain your progress. There are many avenues to explore creative saving. Some people recommend when saving for trips, to make a shadow box about the place you want to go and fill it with money. This can sit somewhere safe in your house where you can watch the progress being made. Others swear by the $5 trick. This is where every time you receive $5, whether it is a friend paying you back or in the form of change, you save it. It doesn’t matter how you receive the $5, you have to save it. Some say they’ve gone back and looked at their $5 dollar box and had unknowingly saved upwards of $1,000.
The Bottom Line
Saving money can be hard. We live in a world where the temptation to spend is everywhere. But being in poor financial health can be far worse than not buying the next new thing we wanted. Debt can cause serious setbacks in nearly all aspects of life. Being a responsible and proactive money saver is necessary to avoid falling into holes of debt. It can be daunting, but it’s certainly not impossible. The key is to find a method that works for you and your lifestyle. From there, it’s up to you to take care of your financial health.
About the Author
Emma Davis is a rue digital nomad. Emma spends her time writing and traveling the globe in pursuit of her next great adventure. From travel guides to career advice, she hopes to help readers see the world as she experiences it—helping others craft a life where they can work hard and play often.