How do you view your financial health? Are you thinking that it only comes when you’re a millionaire, inherit a fortune, or win the lottery?
Creating healthy habits is the best way to build a healthy financial future. Like many good habits, these are things that you can start doing today—and continue for the rest of your life.
Let’s look at 6 smart habits that can help increase your financial health and well-being.
- Get an Overview
Jus like physical health, financial health starts by getting a benchmark. If you were trying to lose weight, the first thing you’d do is get on a scale to know how much you needed to lose.
Of course, you might also try on your favorite jeans or see if your favorite jacket still fits.
In finances, it’s similar. You need to know what is what.
This is often one of the trickiest steps because it requires shining the light on things that may have been in the dark. It requires stepping out of denial and into the light.
- How many credit cards do you have balances on?
- What is the interest on each card?
- What bills are fixed, and what are variable?
- What are your spending habits?
As you get an overview, you’ll see things in the clear light of day. With this in hand, you’ll be able to start making different choices.
- Make New Spending Decisions
What are your spending habits? Do you buy the latest fashion as soon as it hits the store? Do you buy extra because your Mom always did? Do you buy in bulk even if you’re living solo?
Understanding your habits will help you make new decisions. It doesn’t mean you’ll cancel every subscription or never buy another outfit. However, it will help you know if your decisions are helping you achieve financial health.
- Consolidate Debt
One of the biggest outflows is often in credit card debt. If you owe a lot of money on debt, consider your options. You may want to look into debt consolidation, or speak with a financial advisor.
Many programs exist to help individuals reduce high-interest credit card debt into manageable monthly payments.
- Practice Daily Habits
Similar to building physical health, daily habits will benefit your financial health. It’s important to consider what you’re already doing well, so you can do more of it. On the other hand, it’s useful to notice problem areas, so you can take action to build new habits.
Here are some habits that may be useful as you work towards financial health.
- Pay down your debt
- Evaluate monthly spending
- Use cash to pay for daily expenses
- Invest in retirement accounts
- Choose high interest savings accounts
- Increase your income with gig jobs
- Focus on free activities
- Include friends in building healthy habits
- Build An Emergency Fund
One of the biggest stressors in financial health is the uncontrollable, unpredictable events. You may have the day-to-day managed and locked down. But, do you have extra cash on hand if a major appliance breaks? Do you have extra cash if your car needs new tires, or you need to fly home to take care of a sick relative?
Financial experts often advise people to start building an emergency fund – even if you aren’t in the free-and-clear yet. You could do this by setting up a savings plan for yourself, such as saving $11 a day for three months. In three months, you’d have an emergency fund of $1000 or after longer a small investment fund should you look into real estate or the stock market to let some percentage of your emergency fund work for you.
While this may not seem like a lot for some people, it can make all the difference. It will reinforce your saving habits, reduce stress, and keep you heading in the right direction.
- Take Steps Today
It’s often said that the journey of 1000 miles begins with a single step. When you’re building habits for financial health, take that first step today.
If you’re wondering what you could do right away, here is a short starter-kit of ideas.
- Make an overview snapshot of your financial health today
- Write down spending habits of the last week
- Make a mind-map about free activities in your neighborhood
- Make a list of friends to contact
- Create a monthly budget
- Research gig jobs on Craigslist to boost your income
You can build smart habits for your financial health. What is the first step you want to take today?