Stories & Advice

How Financially Healthy Are You?

Financial health is a combination of resources, economy, personal choices, and access to good financial advice/services. How healthy are you?

Take this financial health quiz to see where you rankNerd Wallet Financial Health Calculator

Good financial health usually features a few common themes.

  1. You can deal with a financial setback
  2. You’re managing your daily financial life well
  3. You have financial goals you are setting and meeting

The following are healthy behaviors that will help you build to these themes:

  • Pay your bills on time. Do not let bills go to collections. This can ruin your credit and make your financial health struggle. If you have to, at least pay the minimum amount required monthly.
  • Draw up a budget and stick to it. Some of us have to carry a pen and paper around and literally take notes when we spend money. Your phone works just as well and many people use budget apps to help them stay on track.
  • Have an emergency fund for unforeseen issues. You’ll thank yourself.
  • Don’t exceed a manageable debt load. For example, your mortgage shouldn’t take up more than 28% of your income pretax. The 50/30/20 rule works for many people: housing, food, and other necessities shouldn’t exceed 50% of your income after tax. That leaves 30% of your after-tax-income for wants and 20% to debt repayment and other savings.
  • Don’t spend money you don’t have if you aren’t in need.

Just like physical health, financial health has to be maintained day-to-day, year-after-year. While each situation is individual, there are things you can do to keep your overall financial well-being up to snuff.

  • Make your goals early on. Yes, you’ll most likely have some goals change in life. But having something you’re working towards can help you save and budget. Decide on what you want to achieve (home, kids, college, etc.) then budget and plan for those goals.
  • Put money aside for retirement, pension, and savings. Even if you can only put aside a little, that’s better than nothing.
  • Just because you get paid more, doesn’t mean your cost of living has to go up. People will usually get into more debt even as they get paid more. You don’t need the newest car and maybe you really don’t need all those extra rooms in your home. Decide what’s important, live below your means, get out of debt as soon as you can, put the rest into savings/emergency fund/retirement/etc.
  • Investments. There may come a time where you’re making enough to live more comfortably. Investments are usually good to look into, as they may help make you even more money for retirement later on. Always do plenty of research before you invest in anything and talk to professionals to help you manage your investments well.
  • Pay off your debts. Debt happens from time to time. But keep up on your monthly payments, delay instant gratification, and follow your budget to get them paid off in a timely matter.
  • Take care of your credit score. Managing your debt and making payments on time will help keep your credit score healthier. Your credit score is an important part of being able to get loans and achieve some bigger goals and dreams down the road.

Sometimes it’s just about taking one day at a time and making good small decisions that add up to really great decisions for your financial health.

What do you do to stay financially healthy? Comment below and share your ideas with us.

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