If you want to start the new year right, you need to seriously think about your financial health. Before you think about your money resolutions for next year, you should ensure that your personal finances are conditioned well.
But what does being financially healthy mean?
This actually depends on you. Some people look at their personal net worth when determining the state of their finances. Other people believe that their finances are healthy if they do not have any debt. For others, being able to stay on track in their financial goals is another sign that they have a healthy financial standing.
According to an article published on CNN.com, 3 out of 10 Americans admitted that they are struggling to get by in 2015. That equates to 31% or 76 million Americans. This was according to the study done by the Federal Reserve Bank. Apparently, this was already an improvement because the previous study found that 38% of Americans are in a difficult financial situation.
The Federal Reserve Board governor Lael Brainard said that it is important that families identify the reasons why they are having financial struggles. This is the only way they can get past it.
5 tasks that will help improve your financial health this year
If you want to give your financial health a boost in 2017, there are 5 important tasks that you need to take care of. In case starting the year right is important to you, then you may want to accomplish these tasks as soon as you can.
Revisit your budget plan. Start by taking a look at your budget plan. If you do not have one, it is about time that you create a plan that you can start using in 2017. This plan is one of the things that will define your financial standing. It will help you see what part of your finances need work. Of course, you have to check if your budget plan is updated. In case you are finding it hard to stick to your budget, that is a sign that you need to take a look at it and make some updates based on the changes that you went through in 2016. Your budget should be sensitive to what goes on in your life. If you will be making changes in this year, then it is a good time for you to look at your budget plan so you can see your financial standing.
Check your credit report. This is another window to your financial health. If you want to see if you have a healthy financial standing or not, this is one of the reports that you need to look into. Having debt is not really an indication that you have a financial problem. However, if your credit score is low, that means you need to improve your credit behavior. The state of your credit score will be one of the things that you have to work on if you want to have a healthier financial standing next year.
Analyze your debts. If your credit report is less than stellar, that means you need to start analyzing your debts. If you happened to go through 2016 without any debt, then you are one of the lucky few. However, completely eliminating debt from your life is not really advisable because it can limit the financial opportunities that you can enjoy. What you need to do is to put your debts under control. According to the data from StudentLoanHero.com, 30% of their survey respondents said that their main financial resolution involves paying off debt. If you find that you have a high balance, you need a repayment plan. Analyze your existing debts so you will know what to do with them this year.
Create new saving goals. The fourth task that you need to work on is new saving goals. This will help you have a better financial health this year. Most of the time, having goals will help you make better financial choices. After all, if you know that you need to save up for a down payment on your dream house, you will think twice before you spend money unnecessarily. Feel free to add more goals to the ones that you already have.
Look for new income-earning opportunities. The fifth and final task involves earning more money. If you want to grow your wealth, you need to have extra money after expenses. This is called the disposable income. You can use it to invest your money or pay off high-interest debts. Ideally, you want to focus on opening passive income sources. That way, you can earn more without worrying about being too tired to enjoy your income.
These 5 tasks will help set up your finances so you can enjoy a healthier financial standing this 2017.
Rules that will help maintain a healthy financial life
When you have successfully reached a healthy financial position, your effort will not stop there. It is just the same as someone who just reached their ideal weight. Even if you got the weight that you wanted, you still have to continue regulating what you eat and exercise regularly. This is necessary if you want to enjoy your ideal weight for a long time. The same is expected after you have reached the ideal financial health. You need to follow certain rules and implement the right habits if you want to keep your finances healthy. Here are 5 rules that you need to live by if you want to keep your finances in good condition.
Make sure your budget is aligned with your current lifestyle. Start by looking at your budget. Some people make the mistake of creating a budget and then leaving it at that. After a couple of months, they find it hard to follow the budget. They make excuses so they will not feel guilty about veering from the budget. If they only revisit their budget every now and then, they will realize that the problem is not their self-control. It is their budget plan. As your life goes through changes, your priorities will change as well. That can affect your finances. Because of that connection, you need to ensure that your budget is always aligned with your current lifestyle.
Have an emergency fund. Another important rule to follow is to always have an emergency fund. You cannot consider yourself having a great financial health if you do not have this fund. This is one of the things that will keep you out of debt. When you encounter an emergency, you do not have to worry about borrowing money to get out of it. You can simply use your emergency fund and live with less stress.
Be cautious of lifestyle inflation. The truth is, lifestyle upgrades can be hazardous to your financial health. Some people are quick to upgrade their lifestyles after a salary raise or an unexpected bonus. This should not be the case. While you deserve some reward, it is also very important for you to exert some self-control. Analyze your finances and see if there is somewhere that the money should be allocated to. It will be better if you add it to your savings or debt payment fund.
Create a spending plan. According to a study published in Yale.edu, it is revealed that spending money can make people happy. This is probably why there is such a thing as retail therapy. However, the study further suggests that the increase in happiness is only possible if the money is spent on a person’s definition of the “right expense.” For instance, if buying a new gadget is important to you because it will help you with work, then it is okay to buy one even if your old one is still working.
Always have a saving goal. Finally, it is important for you to always have a saving goal. As mentioned, goals will give your financial decisions direction. It will give you the motivation to maintain the financial health that you worked so hard to achieve. Even if you finished with one goal, feel free to create a new one. Slowly but surely, you should be able to improve your financial position because of all the saving goals that you have completed.
Here is a video that gives three simple tips on how you can set saving goals so you can start improving your financial health.