Being financially
healthy usually means having sufficient income to cover for daily expenses for
the rest of your life without having to make loans or be in debt in order to
get by every day.
There are people
who achieve this by developing useful money habits which can be seen through
saving and investing over many years. Others become successful enough that
their investment can generate income without daily supervision.
There are many
different approaches to becoming financially healthy and can be taken by
average Americans.
Photo credit: financiallyeliteblog.com |
1.
Avoid consumer debt when possible
Consumer
debt is one of the leading causes of financial ruins. Using your credit cards
to pay for daily expenses, but carry a balance, is equal to paying way more
than the amount of what you bought.
Creditors
use money-generating tools such as:
·
Credit
cards
·
Payday
loans
·
Car
loans
These are
examples of money-generating tools for creditors and the first step toward a
better financial health is to learn how to manage the proper usage of each tool
and by getting rid of high interest debts.
2.
Stop trying to keep up with other people
One of the
many sad and impractical reasons why we spend so much money on things we don’t
really need is because we keep on trying to keep up with other people.
We
sometimes forget the real reason why we get up every morning to go to work and
instead we sulk and ask ourselves how we can get what other people have, which
is not really important.
Some of us
forget that a modest home and car will work just as well, but instead we stress
over things too much even when it does not really affect us in any way.
We need to
see past TV commercials and remember that we don’t really need much to get us
by. While other people are falling for new cars or boats, we need to focus on
building up our finances instead.
3.
Spend less until it hurts
It’s true
that part of saving up is to spend less, however you need to know what you can sacrifice
to become financially healthy.
Only you
can tell what you can or cannot live without. To make it simpler, try starting
a list with the basic necessities in one column and your ‘wants’ in another.
You’ll be able to identify what you can live without and put the funds for your
‘wants’ into your savings instead.
4.
Put yourself on top of the list
What is
this ‘list’ that we need to put ourselves on? It’s a list that may consist of:
·
Utility
bills
·
Groceries
·
Rent
You need
to put ‘retirement’ on top of your list. It may sound selfish but in truth,
you’re still following the third money habit of spending less.
It
encourages you to live on a smaller budget since your money is already
predestined to go somewhere and it’s a powerful saving habit.
Funding an
employer-sponsored 401(k) plan is a great way to get started. The contribution is
deducted right out of your paycheck; you won’t even realize it. Living with
what’s left after paying yourself is a great way to develop this money habit.
5.
Invest on income generating assets
From all
the other money habits that you need to adopt, learning about income generating
assets will secure your financial health even during retirement.
You need
to invest your money in assets that will generate income and appreciate through
the years. Focus on buying assets that will make money instead of depreciating
into a pile of junk.
Investing
in stocks, despite the ups and downs of the stock market, or properties has
helped investors build wealth.
6.
Continue investing
It’s
important to continue investing over the long term. Aside from investing in
stocks, you can also invest on insurance such as life insurance or long term
care insurance.
From the
other types of insurance, life insurance and long term care insurance have
higher chances of getting used. One will provide financial security for your
loved ones while the other will help you pay for expensive long term care costs
in your late adulthood.
7.
Learn to adapt
Lastly,
with all the other money habits you need to develop is being able to adapt to
whatever situation you will be in. the way you spend your money today is going
to directly affect your future’s financial health.
There will
be times when your ability to adapt will be tested and such times may include:
·
Losing
your job
·
Emergency
in the family
·
Unforeseen
fluctuation of prices
You will
need to adjust and think fast. If you lose your job, you need to cut off extra
expenses to make your funds last. Having a part-time job ready in case of a
stock market drop will save you and your future savings. Being adaptable means
you’ll always land on your feet and live a less stressful life.
You're not aiming
for millions to achieve basic financial independence for yourself right now.
Anyone can take follow these habits to become financially healthy.
Having enough
income to cover your living expenses without having to work full time can free
you up to actually enjoy your life instead of remaining on a treadmill of
working and spending.
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