A lot of people take it for granted but financial health is an important part of one’s well-being. Being financially well doesn’t equate to one’s ability to afford a luxury vacation or purchase something at a hefty price. It’s more of your ability to develop a healthy relationship with money so that you are more in control of your finances. It means more financial freedom and independence so that you don’t stress a lot when it comes to meeting both short term and long term goals. It means knowing that you can achieve whatever financial goal you set your eyes on.
It may take a lot of time, patience and discipline, but improving your financial health is definitely possible and you can make it happen with the help of these tips.
Recognize needs vs. wants
It’s a lot easier to make better spending choices if you’re able to differentiate your needs against your wants. Think about your priorities first and the things you need to survive, like shelter, food, transportation and healthcare. Yes, clothing can be considered a necessity but spending too much on clothing that’s beyond your budget is already luxurious. More importantly, don’t forget to have savings listed under your “needs” so that you can make a conscious effort to set money aside for savings regularly.
Don’t spend more than you earn
It might be a little more difficult to follow this rule, especially when you don’t get paid a lot, but just imagine how harder it would get if you spend more than you earn. Living beyond your earning capacity will only get you nowhere. Live within your means and stick to your budget. If you have goals to achieve like a mortgage or some big things you want to purchase, try to cut your spending to give way to bigger savings.
Create a budget and stick to it
The importance of budgeting in financial wellness can’t be overemphasized. A budget will tell you exactly where your money is going. Create a list of the purchases you make on a daily, weekly and monthly basis. Are all of these things important? Which of these items can be classified as needs and which ones are wants? Is there anything you can take out of the list? Perhaps your daily trip to the cafe for a cup of joe before heading to work? Or weekly dinners with friends at fancy food spots?
Pay off your debts
If you have high interest debts and credit cards, you’re not alone. However, if you want to work on improving your financial health, make it a point to gradually reduce your debts. Start with your outstanding balance and debts with high interest. Come up with a plan to reduce your debts like consolidating your credit card balances into one card. Or, you might want to pay them off one at a time. Whatever works for you is fine. The important thing is that you’re able to pay off all your debts and eventually boost your savings.
Automate your savings
Building your savings is one of the most important steps to achieving financial freedom. However, it’s easier said than done. It’s not always easy to set aside some amount of money for savings, especially when you have a long list of bills waiting to be paid at the end of the month. But this is where the saying “pay yourself first” should be applied.
Paying yourself first means that you put your savings first before everything else. And the most effective way to do this is to automate your savings. This means that a certain amount of money is deposited into your savings account from your paycheck. This way, a portion of your salary is automatically “saved” before it even gets spent. Try starting with small amounts but do it consistently.
Just thinking about money and finances can be stressful, especially when you’re in a poor financial situation. But there’s always something you can do about it and it’s never too late to start. Follow these tips to start your journey to good financial health and start it with us. Please feel free to contact Calcite Credit Union for more information.