4 Rules to Improve your Financial Health
October 8, 2020
By Rahul Iyer
If you want good financial health, you must prepare. It takes time and dedication and a whole lot of flexibility. As we all know, life changes dramatically and often in the blink of an eye. If you want to keep your financial health in tip top shape, it takes understanding the rules and following through on them as much as possible. Check out the top 4 rules to improve your financial health starting today.
Plan for Emergencies
Emergencies are the biggest issue that take away from any person’s financial health. If you aren’t prepared for an emergency, it can send even the best planned finances awry. While we can’t predict when emergencies will happen, we can prepare ourselves financially for the worst. Create a separate emergency fund (in a savings account at a separate bank) and save up to six months of expenses in it. This way if the unthinkable happens, such as losing your job, you’ll have money to live off of while you figure things out.
Create a Budget and Stick to It
Don’t ‘wing’ your finances. Create a budget and stick to it. Revisit it often too – at least once a year. A budget is like a map for your money. It tells you how much money you have coming in and out each month. With a budget, you can determine if you need to cut back, can save more, or need to bring more money in to satisfy your obligations. Save for Retirement
No matter how young or old you are, always save for retirement. At the very least, contribute to your 401K to get your employer’s match. It’s like ‘free money’ so don’t skip it. Even if it’s only a few thousand dollars a year, every dollar adds up as the earnings compound through the years.
Of course, if there’s room in your budget, contribute to your 401K, IRA, and any other retirement accounts to ensure you have enough for your golden years.
Know your Net Worth
It’s eye-opening to look at your net worth and see where you stand. Even if you make ‘a lot’ of money every year, that doesn’t mean you have a high net worth. If you spend as much as you make, you may not have nearly the worth you thought.
Carefully go through your assets and liabilities to see where you stand. Make adjustments as needed, including cutting back on your expenses or increasing your income to increase your net worth.
Improve your Financial Health Today
Everyone can improve their financial health, even people who think they are doing ‘well.’ There is always room to make positive changes, improving your chance of financial security not only today but well into the future.
As we navigate our new normal and wait to see how the economy responds, it’s more important than ever to take stock of your finances and look for ways to improve to ensure financial security no matter what life throws at us.