As much as people emphasize mental and physical health, financial health is also equally important in a person’s life. But, what exactly is this financial health?
It primarily refers to the financial goals of a person which goes beyond the rules of thumb that our grandparents and great grandparents have diligently lived by.
There are ways to improve your financial health, and in this article, we’ve jotted down the five rules to improve your financial health. Stick around to learn more.
Understanding needs versus wants
Critically, spending choices are also known as the backbone of taking financial decisions. We’re not saying you do not treat yourself with a happy cocktail, or a take out dinner or a movie once in a while but, these are luxuries that can be avoided until and unless necessary. If you find yourself always spending money on the non-essential items, then you have to reevaluate your spending choices and decision-making capabilities. Needs generally include food, shelter, health care and clothing. We suggest you stick to absolute essentials in your budget that comes in the 10% of your income. Once you can handle this without difficulty, then calculate the leftover from your income.
Planning for emergencies
Whether you like it or not, emergencies, like road accidents, health care emergencies are inevitable in a human being’s life, as a part of nature’s process. You mustn’t be broke in need of the hour, and you should have enough expenses saved up to tackle these emergencies in the right manner. A typical suggestion is that you have to set aside at least six months of your income only for these emergency conditions. It could be anything from car repairs, home renovation to sickness and hospitalization.
Start saving from an early age – the earlier, the better
Thanks to all the interest during compound interests that you’re savings will make by just keeping your money in the account. This is one of the best benefits of having a savings account when you start your saving journey early in your age. This not only helps you buy assets in the future like a car or a big bungalow, but it also acts as—an investment for your retirement.
There is a standard rule of nature that the older you get, the more money you will be making due to the experience you’re gaining in the professional field – which also, in turn, means that the more money you start making, the more money you start saving and spending. Lifestyle inflation is directly proportional to the corresponding relationship you have with your money. Hence people must start earning more money and spending less money; this is the mantra for planning lifestyle inflation.
Do some personal calculations
You do not have to be a financial advisor or visit a financial expert (until and unless necessary) to calculate your expenses, just some basic math about the things you require in your life and things that can wait. They are just luxuries that can add to your superficial lifestyle.