Did you know that 56% of people who live in the United States have less than $5,000 in savings? Even worse, a third of those who live in the United States have less than $1,000 in savings. This lack of saving is dangerous, especially when North Americans are spending more than that on a monthly basis.
People like this who aren’t saving more than they’re spending are in poor financial health. “What is financial health?” you may ask.
To learn more about what financial health is, why it matters, and how you can better your financial health, keep reading. We have everything you need to know.
What Is Financial Health?
Financial health is a determinant that looks at how prepared you are to take on different financial situations throughout your life. It looks at your net worth, credit score, debt, savings, retirement fund, investments, and more.
It looks at your financial situations holistically to determine whether or not you’re suited to handle tough financial situations. Basically, it looks at whether or not you can pay large bills if something went downhill.
There are several different factors that make up your financial health. Let’s walk through each factor and talk about how it contributes to your overall financial health.
If you want to have complete control over your finances, you need a budget. Whether you pay for a budget tracker online or use a free resource like Google Sheets, you need to understand what’s coming and what’s going out.
Budgeting can be a real eye-opener. You might not realize that you spend $100 a month going to Starbucks or $500 a month online shopping. Singling out and controlling these habits can help you improve your financial health.
Without a budget, it’s likely that you’re just spending without thinking. Having the numbers in front of you will help you make more sound financial decisions.
It’s no secret that the amount that you have in savings matters. Whether you’re saving for something specific or have a general emergency fund, saving money in a bank account is great!
These funds aren’t best saved in a bank account for the long-term, but they are great for short-term use. You can also use this money to help when you’re having trouble paying bills or making other important purchases.
Your savings are your safety net. Building a nice foundation to fall back on is important for everyone.
Debt is scary. The world tells us that debt defines who we are, but we know that it’s just a number.
Don’t let a number on a screen bring you down. That number won’t be there forever.
In fact, some debt can be good.
People go into debt getting a degree or opening a business. Neither of these things is bad. In fact, they can actually make someone more money in the future to pay off that debt.
Invest. Invest. Invest.
If you haven’t heard this a million times, you must’ve been hiding under a rock. Investing is one of the most important financial indicators.
Even if you don’t think you have the money to invest, you should invest anyway. Multiplying your money is more important than building a stagnant pool in your savings.
Your Business Endeavors
Whether you’re an investor, a business owner, or something else, it’s likely that you have some kind of business endeavour. If you don’t, you should find one.
You can trade stocks or own real estate. Whatever it is, make this something you love (that will also make you money).
Your business endeavours show that you’re able to reap the rewards of financial risk. They also contribute positively to your financial health.
Why Does Financial Health Matter?
Losing money and being in debt are two of the most stressful things. People tightly tie their mental health to their financial health.
One of the biggest reasons to take care of your financial health is because it will – in turn – help your mental health. Other than this, you should improve your financial health for monetary reasons. You can pay bills easier, you don’t have to worry about where you’ll get food, and you can make more money using the money you already have.
How Can I Better My Financial Health?
The easiest way to improve your financial health is by learning about financial literacy. Everyone should have a great knowledge of their finances and how money can work for them.
As you learn more and more about money and how to use it to help you rather than hurt you, you’ll be amazed at what you can do. Having money makes living a whole lot easier.
You should also reach out to professionals that can help you get the best bang for your buck. There are financial advisors and accountants that would love to help you look at how you can improve your finances.
Plus, you can improve your finances in other ways. Did you know that there are professionals that will help you look for the best loans for you?
That’s right! Reach out to the best mortgage brokers and loan experts to make the most out of your loans.
If you’re adjusting your finances where you can and making smarter decisions for your financial situation, you’re going to naturally have better financial health. With that, your mental health and emotional health will improve.
More on Improving Your Finances
So, what is financial health? In short, it’s an extremely important indicator of your ability to incur large, emergency expenses at any point in time. It can help you and your financial professionals determine how wisely you’re using your money.
Maintaining and improving your financial health is crucial if you’re looking to have a stable financial situation. Start by educating yourself and work towards small changes that will help your financial situation in the long-run. Don’t forget to save and invest!
To learn more about improving your financial health, check out the rest of our blog where have more helpful information like this.