What is financial well being?
Financial well-being refers to a feeling of financial security, safe in the knowledge that you can financially cover all of your expenses. It’s about remaining economically healthy and achieving the financial freedom that you desire. Improving your financial well being is not an easy road, but there are many steps that you can take to get on the right track.
A Detailed Budget
To improve your financial well being, the first thing you need to do is create a detailed budget. You’ll need to list your outgoings, create spending categories, and track these categories against your income. To support your budgeting, there are a few budgeting tools which you can use:
- Clarity Money: The Clarity Money app analyzes your personal finances using machine learning, supporting you to make smarter choices with your money. You’ll save plenty of time with the automated expense monitoring and get your bills organized.
- Wally: Using the Wally app, you can monitor your spending, accounts and create budgets. You can access insights about your spending habits and patterns; manage foreign currency, and boost your net worth.
Investment opportunities can help you to boost your finances and establish financial security. As a newbie investor, these two options are just perfect.
- Certificate Of Deposit: These are a type of financial product offered by banks or credit unions. A Certificate of Deposit provides premium interest rates, provided that the customer leaves an untouched lump-sum in the account. The sum of money cannot be withdrawn until a predetermined time frame has passed. As a beginner investor, CDs are appealing, as they are low risk.
- Robo Advisor: A Robo Advisor is a virtual tool used for managing finances and making investments. An RA functions by collecting your financial data and using this data to provide investment recommendations. With no minimum amount required, a Robo Advisor is another excellent starting point for beginner investors.
Improve Your Earning Potential
To boost your financial well being, you should work towards improving your earning potential. There are several ways that you can do this:
- The Career Ladder: Establish the next step within your career, and figure out what you need to do to get there? Design yourself a roadmap to plan your progress.
- Side Hustle: Got a bit of spare time on your hands? Whether it’s selling homemade items or casual freelance work, a side hustle is a great way to earn a little extra.
- Passive Income Stream: A passive income stream allows you to earn without actively participating in a new job. Think Airbnb hosting, a passive a blog, or peer-to-peer lending.
Get Your Debts Under Control
When debts are dragging you down, it’s pretty difficult to maintain financial health. To get things back on track, it can be helpful to consider a debt reduction technique. One popular debt reduction strategy is the ‘debt avalanche method.’ The method involves decreasing your debts by focusing first on the debt that has the highest interest rate. Once the first debt is paid, you move onto the debt with the next highest rate and keep repeating this process. The sooner that you escape from debt, the sooner than you can boost your savings and improve your finances.
Lower Your Expenses
It might sound simple, but the easiest way to improve your financial health is to reduce your expenses. Start by looking at all your bills, from your gas and electricity to your car insurance, Internet, and phone providers. Conduct research to see if you can find cheaper providers, using price comparison websites to help you. While you’re at it, download Pocket Guard; this app will search for cheaper providers once you’ve input your info. Further ideas to lower your expenses could include:
- Shop second hand: Shopping in second hand and thrift stores can be a fantastic way to reduce your monthly expenses.
- Pre-plan meals: Meal planning can help you to reduce the amount you spend on your groceries and create less waste.
Set Financial Goals
Setting financial goals can help you to stay on the right track and monitor your progress. When you are setting goals, it can be helpful to use the SMART Framework. Goals should be specific, measurable, achievable, relevant, and time-bound. Your goals might involve reducing your debts, increasing your savings, or pursuing a new investment opportunity.
You may have concluded that you need to take out a loan to get on top of your finances. When you borrow money, it’s essential to make wise choices and thoroughly research your options. Taking out a loan requires a detailed understanding of the terms, repayments, and schedule. It can be helpful to use a loan amortization calculator to figure out your loan amortization schedule. With a clear understanding of your loan schedule, you’ll be in the best position to manage your finances.
Having an emergency fund can afford you peace of mind, knowing that you have some funds to fall back on if you need them. It can take a little while to build up an emergency fund, but it’s worth it nonetheless. The most important thing about the emergency fund is not to touch the money unless it’s absolutely necessary. Depending on your circumstances, it may help establish some rules about what counts as an acceptable emergency.
Consider The Future
Planning for your future can help you to feel more financially secure in the present. One way that you can do this is by creating a retirement plan. There are several different types of retirement accounts. One option is a Roth IRA; these are accounts that you can open and fund independently. With a Roth IRA, you can pay in after-tax money, which means you won’t receive income tax deductions. Another option is a 401 (k); employers offer these accounts. A 401 (k) account allows you to contribute pre-tax, and your employer will match the contributions that you pay in.
A Financial Advisor
A financial advisor can help you to manage your personal finances. They work to assess your financial situation, such as your expenses, debts, and assets and use this data to suggest improvements. A financial advisor can help you plan for retirement, negotiate your taxes, recommend investments, and so on. If you’re feeling a little overwhelmed by your finances, meeting with a financial advisor can help you to gain some clarity. Before you commitment to a financial advisor, conduct research by seeking out reviews and testimonials.
Becoming financially healthy isn’t just about reaching your financial goals; it’s about appreciating what you have and feeling content. It can be easy to compare your financial situation to others’, but doing so can leave you feeling dissatisfied and stressed out. Seek to find contentment with your current salary and lifestyle, while acknowledging that it’s healthy to have financial goals.
Regularly Revisit Your Budget
Once you’ve put a budget in place, it’s advisable to revisit it regularly. As your financial situation and commitments change, there may be changes that you can make for the better. Budgeting is one of the best ways to maintain your financial well being and work your way towards financial freedom.
Hopefully, these twelve tips will get you on the right path and help you to create a financial plan that works for you. Improving your finances doesn’t happen overnight, it takes a little patience and a process of trial and error.