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Do you treat your financial health as importantly as your physical health?

4 Jan 2021

financial health

Like your physical health, financial health is a vital element required to live a full, happy and successful life.

Creating a stable financial situation does more than alleviate stress; it provides a solid foundation upon which to build a secure financial future. In this blog our experts will explain the ways in which you can give your financial health a wellness check.

What does it mean to be financially healthy?

Your financial health impacts almost all aspects of your life – from affording a spin class after work to what age you’ll be when you can retire.

As with any form of exercise, financial health sadly isn’t something you can achieve through one high intensity workout. It takes time and effort to cultivate your present financial health and to consistently persist and look to the future, even during the hard times.

By managing your day-to-day finances and by thinking longer term, you will be able to create resilient and lasting strategies to carry you through the ups, the downs and everything in between.

Why is financial health so important?

Financial health provides peace of mind, that come what may you are financially stable. Being financially healthy doesn’t mean having money to burn, it means paying attention to different parts of your finances to make sure certain needs are met.

This year has financially tested a large percentage of the population, furlough and sadly redundancies have pushed many to their limits. Ask yourself, if your car broke down or your boiler packed up, could you afford the expense?

If the need was dire, you could look to borrow money on credit. But that’s only an option if you have a good credit history and a good credit score, both of which will be affected by your overall financial health.

Tell-tale signs of bad financial health.

If the below ring true then you may need to work on improving your financial health:

  • I couldn’t afford to pay for a common financial emergency (car breaking down for instance)from my savings
  • I have high credit card balances which I can’t afford to pay off in full
  • I’ve been turned down for a credit application because of a bad credit rating
  • I often stress about not being able to make ends meet
  • I’ve been forced into high interest credit agreements to pay my bills
  • I don’t know how much I spend each month and don’t have a budget

Even if the above do ring true for you, rest assured nobody needs to be stuck with a bad financial situation.

How to improve your financial health

Credit

Pay attention to your credit. Good credit gives you the ability to borrow when you need – or want – to. Credit cards, loans and mortgages – with the best interest rates – will be available to you if you have a good credit score.

You can improve your credit score by paying your credit cards and other debt on time each month. This will quickly have an impact.

Debt

It is easy to take advantage of high credit card limits and rack up debt, especially in the current climate. However, borrowing more than you can afford is a sign of lifestyle inflation which can lead to a spiral of debt payments that if left unchecked, can grow to consume your entire income.

Your first step should be to pay off high-interest debt as this can eat up a big portion of your income. Pay off these types of debt and avoid them if you can.

Savings

Those with good financial health have planned for both emergencies and for the long term. Emergency funds should ideally cover a minimum of three to six months of expenses if you have a stable job. Self-employed and contract workers should double that to at least six to 12 months of expenses in savings.

Rather than relying on making a transfer each month into your savings account, set up a monthly standing order, then money is saved without you having to even think about it.

Retirement

Unless you want to work forever, you will need a retirement plan. A good retirement plan gives you a targeted date to stop working and live the retirement you aspired to.

You can work out your current pension age and learn more about pensions here.

Insurance

It is wise to have a financial backup plan. Major expenses such as incapacitating illness, or fires at home would bankrupt many people without good insurance. Popular and important insurance includes health, home, and life insurance.

Anyone can achieve financial health

Like your physical, taking control of your financial health does not need to be time consuming or costly. You don’t have to be rich to be financially healthy. You don’t need a six-figure income to fund a stable financial future. But your finances won’t fix themselves. A consistent focus on your budget and financial matters is essential, particularly if you are trying to turn around financial struggles.

If you would like to speak to one of our experts about improving your financial health, get in touch today.

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