Adjusting yourself to grow your financial well-being
Financial wellness is about having control and gaining confidence in your financial decisions. What gets measured gets improved. The first step to improving your financial well-being is to start measuring your financial situation with some accuracy. If you regularly find yourself at a loss as to where your money went, or have no idea how to break even, let alone begin saving, the solution is accurate measurement.
Start by creating a budget. The first step to improving your financial well-being is, knowing where you stand financially. Determine how much incoming and outgoing money you have each month, and identify areas where you can cut back on spending. Be mindful of your spending habits, and identify areas where you can cut back. Consider cutting out unnecessary subscriptions, memberships, or other expenses draining your budget.
Then you need to set realistic financial goals as this will help you stay focused and motivated. Whether your goal is to save for a down payment on a house, pay off credit card debt, or build up your savings, setting specific, measurable, and achievable goals will help you stay on track.
Make a plan to pay off short-term debt. Long-term debt can be beneficial to your overall financial health. This is especially true when using leverage to purchase investments which yield income – as is the case when using debt to buy investment properties. On the other hand, high-interest; or short-term debt can be a major obstacle to achieving financial well-being. Pay off credit card debt or other high-interest debt as quickly as possible. In extreme cases, you can do this through debt consolidation or by creating a debt repayment plan.
Making minimum payments is not enough to eliminate credit card debt. If one makes the minimum payment on a 21% credit card with a minimum 3% of principal repayment, it would take roughly 30 years to repay the debt on the card. So making more than the minimum payment is crucial if there is any hope for you to become credit card debt free.
Once you have eliminated your short-term debts, building an emergency fund is essential to your financial well-being. Having a cushion of savings can help you weather unexpected expenses. Your emergency fund can also form the basis for beginning to invest and securing your wealth for the long term.
Investing can help you grow your wealth over time. Consider investing in real estate and other under-priced assets to yield maximum results. Post-covid has seen higher inflation. The reality is that savings accounts will result in negative returns when the depreciating value of money is factored in. It would be far wiser to invest in physical assets to protect your savings while earning supernormal returns.
It’s worth noting that financial well-being is a journey and it’s important to be patient and persistent. It’s also important to remember that it’s not about achieving perfection, but making small steps towards a better financial future by continually evaluating your financial decision.
