Financial wellness is being in a position to comfortably cover your needs, be prepared for emergencies and the future, and settle your debts. Many people regret not setting up a financial plan earlier in their life; even more, they believe that they don’t have enough money to save.
Ensuring that you are financially healthy is easier than you might think, but it does take discipline. You don’t need to have millions lying in the bank to begin investing but it is vital to prepare for the future and live within your means.
How can you become financially healthy?
Incorporating financial wellness into your life can be overwhelming at first, especially if you have left this for later in life. It’s not uncommon for people to be living above their means, and most have never set a budget to control their long-term and day-to-day spending.
Setting goals and having a clear budget is perhaps one of the most important things to incorporate into your life to ensure your money works for you. Assessing how you are currently spending your money can be eye-opening and help you cut down on unnecessary expenses. It would be best if you got realistic with your budget.
There are four essential aspects to incorporate into your financial decision:
- Whether you have control over your daily and monthly finances.
- Whether you currently have financial freedom and can comfortably live the life you want to.
- Whether you can financially survive emergency expenses such as a severe illness or losing your job.
- Whether you are realistically on track to meet your short and long-term financial goals.
Budgeting and setting attainable goals will set you apart from those struggling to make ends meet and those financially thriving. Start with small, short-term goals and save minimal amounts. Over time, even the most minor amounts will grow exponentially.
While you are saving money and cutting down on unnecessary costs, you may feel broke and like you are falling behind the crowd. It’s important to ask yourself if purchasing a newer car, fancy couch, or branded handbag is worth the long-term impact or if it would be wiser to invest that money.
You can make big purchases once you are financially comfortable and know you have an emergency fund to protect you — try to be satisfied with being temporarily uncomfortable.
Manage your debt reasonably. If you can afford to pay a small amount more than the minimum payment, it is well worth doing. Avoid taking on unnecessary debt, and remember the financial principle, “if you can’t afford to buy it twice, you can’t afford it.”
What are finance goals?
Financial targets should be both short-term and long-term. Setting goals ensures that you don’t take on unnecessary debt. In the short term, look at things you’d like to achieve.
Short term goals can look like this:
- Saving for a vacation.
- Purchasing the latest Apple Watch.
- Upgrading your furniture.
- Saving for a wedding.
It takes more patience and work, but setting short-term financial goals is rewarding. You avoid paying excess interest, and by denying yourself instant gratification, you will protect your future. Spending $17 a month for 24 months towards the Apple Watch 7 Series may seem tempting. However, this unnecessary debt will hang over your head for two years.
Long-term financial goals are often pushed aside to deal with in the future. It can seem overwhelming to think of a retirement plan, or purchasing your dream house might seem like an obstacle you’ll never achieve.
Long term goals can look like the following:
- Purchasing an additional home for investment purchases or vacation.
- Buying a franchise/starting a business.
- Setting a high amount to have obtained for your retirement fund.
- Having true financial freedom.
Once you’ve determined your overall financial goals, deciding your investing strategy should be your next logical move. M1 Finance, an all-in-one money management platform that helps potential investors achieve long-term financial wellness, offers a useful guide on how to set financial goals to build the future you want. And if you’re new to the investing world and want to get a feel for your own risk tolerance, M1 Finance has a helpful quiz you can take to see where you stand.
Creating a blueprint and roadmap to achieve your goals will help you visualize which steps are essential and keep you on track. It’s impossible to achieve any goal without a plan.
Tips for incorporating financial wellness into your life
Be practical about how much you can afford to put into savings and how much you need to pay towards your debt. Pick which goals are most important for you to achieve and put a plan together for how much money you want to be investing throughout your life.
For example, you should have an idea of which financial goals you want to be focusing on now, in your 40s, in your 60s, and so forth. Start small with yearly goals, a five-year plan, and a 10-year plan.
You should avoid trying to “keep up with the Joneses.” While having the latest technology is incredible, it is best to live within your means and eliminate unnecessary costs.
Investing in life policies and insurance plans will best protect your future. Knowing you have a backup plan will help you avoid dipping into your savings or taking out a personal loan to cover emergencies.
The key to achieving your goals is in the details. The budget you used in your 20s, or when you only had one child, will no longer be relevant as your life changes. Your plans will need to be adaptable to ensure you acclimate to the life around you.
Take the time to educate yourself on the scope of financial wellness continuously. Getting in contact with a financial coach or advisor can help you steer your money in the right direction. Research the best investment plans, find policies that work for you, and continuously work towards creating a financially free future.
Ask yourself the following questions:
- Where do I want to be in 5 years?
- Do I have a reliable retirement plan in place?
- Am I prepared for an emergency?
- What is the main financial goal for me to achieve in the next year, ten years, and 30 years?
- Where don’t I want to be in five years, etc.?
Everyone can live a financially free life, but it takes some work to achieve your goals comfortably. You need to be willing to temporarily live with less if you want to live well as you grow older. Financial wellness seems overwhelming until you break it into smaller steps.
You must plan for the future and work with a reasonable budget. Your goals and budget should adapt as life changes. Start by incorporating small goals and saving minimal amounts. Everyone can afford to work towards their future.
Featured image: abdrahimmahfar/Shutterstock.com
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