How to Increase Your Financial Health

What is Financial Health?

Your financial health is a compilation of multiple things. Some of which includes your investments, your assets, your debt and your liabilities. Your monthly income and the amount of expenses you pay per month are also factored into your financial health. There’s technically two parts to financial health. There’s your long-term health – this is mostly comprised of assets and net worth and is more measured with what your worth is as opposed to your short term balance sheet.. Then there is also your short-term health. This is mostly comprised of your income, debt obligations and monthly expenses and is a function of your debt to income ratio. Overall, it’s something used to gauge how durable you are in terms of your finances and whether you have a strong financial constitution. If you have good financial health this typically means you have good credit and you are someone that won’t necessarily need to rely on others for financial assistance.

How Can You Increase Your Financial Health?

You can increase your financial health the same way you can increase your physical health. You can do so with healthy budgeting and by performing financial exercises that consist of saving, paying down bills and being proactive about your financial situation. Financial health can be improved just like anything else. You can bolster up your financial health by saving up money and allocating more of your money towards an emergency fund or a retirement fund. The general idea is that you have enough a cushion that should life happen, you’ll be as best prepared for it as you can be.

Investing

One of the keys to good financials is investing. If you’re a sound investor you’ll often be able to compound your hard-earned savings into a multitude and ideally have an established game plan to retire sooner. Investing is often times the key to financial prosperity, without it, it’s much more difficult to accumulate wealth and sources of passive income. If you don’t invest your much more prone to the whims of inflation and being subject to different economic cycles and that typically won’t leave you in a position of financial strength.

Avoiding Bad Financial Health

One of the keys to avoiding bad financial health is avoiding debt. Debt can be very costly in the long run and will cause you to lose out on your hard-earned money to interest payments. You always want to avoid interest payments whenever possible and remain financially flexible. Trying to make better financial decisions is also an integral part of that of process and can help you avoid costly mistakes. Finally, if you can keep both debt and monthly expenses low you are much more likely to avoid poor financial health and be financially agile enough where you can weather different storms and different coming hardships.

Which Consumers Have Good Financial Health?

A consumer with good financial health is often times one who has their head on right and is able to withstand unexpected expenses that may arise with financial fortitude. They tend to have enough of a financial cushion that they can endure times of economic uncertainty and recessionary periods. This doesn’t mean they’re invincible but it simply means that they are financially prepared and are well established with regards to their finances. Like everyone else, they are subject to the ebbs and flows of the markets and differences in interest rates and increases in inflation. They are not immune to the world but they are simply better prepared financially and tend to be less reliant on loans and debt in order to adjust to life’s financial changes.