Why is your financial health important?
The past few months have been nothing but challenging for a lot of people. Job security was up in limbo, savings were being depleted, and people you know are getting sick. Not to mention how it changed the way people work. Even the children had to make a big adjustment. They had to begin taking classes at home in front of the computer.
Working and even studying at home might sound like a great set up but the experience is not the same for everyone. Some of the children are having a difficult time adjusting to their new learning situation. They have been used to seeing people and now they are forced to learn in front of a computer. Though some schools have opened up, a lot more are still at home.
Working at home could be different and adults are more resilient to change. If you are working from home, it would still be a lot different compared to being in the office. But this is good for your financial health. Some people did not do so well. CNBC shared that about 22 million people lost their jobs during the early months of the health crisis.
This is why you need to personally take control of your finances and make sure that you take proactive and positive steps to get back up on your feet. To do that, you need to make sure that you understand your current financial situation first. This is different for every person. Once you identify this, understand your current pain points to know the way forward. Here are a few tips to help you stay on top of your finances.
Decide on your long term goals early
Your financial health covers a lot of areas. It can refer to your savings, retirement plans, and even expenses. But one thing you need constant as you champion your own finances is your long term goals. For one, these goals serve as a clear guide on where you want to be in life. Without them, you run the risk of mindlessly going through life. You will be like a ship circling around and lost at sea without getting to port.
Your long term goals help shape your current habits. You need to make sure that your current actions will ultimately lead you to achieve your long term targets. Since it normally takes quite a while to accomplish these goals, consistency is crucial. And with consistency, you develop positive financial habits over time.
Habit formation is a crucial part of the overall process. Your success will depend largely on the type of habits you form. If you practice saving first before mindless pending, you will find that you are able to save money better. But if you are used to buying and giving in to your wants first before saving, then it would make it challenging for you to save enough to reach your goals.
Plan out your short term goals
Your financial health will also depend on how you put together your short-term goals. One way to look at these goals is in relation to your long term targets. They are the smaller steps you take that will guide you into achieving your ultimate goals. Your short-term goals are smaller pieces of your journey leading to your long term targets.
Just like if you want to retire at an early age, your short-term goals should all help you achieve that. This is important as Pew Trusts shares that many Americans expect to work past 65 years old. This could include paying down your credit card bills. The goal is to make sure you do not have significant card payments leading to retirement. This helps you focus on saving for retirement more than paying your lenders.
If you take a look at your short-term goals, credit card payments might not have a direct relation to your retirement plans. But this can help you improve your financial situation and give you the chance to retire early. This is how your short-term goals should be. They need to contribute to your journey in reaching your long-term and ultimate goals.
Anchor your progress on consistency and habit formation
Building up and maintaining your financial health is a long term process. You cannot wake up one day and claim you have a habit of saving money if you only started the other day. It takes a lot longer time than that. But do not worry. That can actually work to your advantage. Since habit formation takes quite a while, you do not have to burden yourself with a high amount at the beginning.
To help you build that habit of saving money, start with a small amount. The idea is to help you develop a consistent action you can focus on accomplishing on a definite schedule. The easier it is to do, the more you can focus on habit building. You then increase the amount over time slowly. When you get windfall money, you can also put a significant amount of that towards your savings fund.
The goal is to focus on the habit. Once you have that on automatic, it would be easy to sustain it over a long period of time. It can be a habit of saving money, spending wisely, or even taking care of your health. When you want to take care of your finances in the long run, the habits you form today will play a crucial part in your success tomorrow.
Pivot when necessary but keep your sights on your goals
It is ironic that one of the constant things in this world is change. This is the reason why you need to be able to change gears at any given time. This is similar to riding a bike where you constantly have to change your gears depending on the road you are taking. But regardless of the difficulty of the journey, you continue on your path to reach your goals.
One thing to help you do this is spending time and effort to come up with a comprehensive household budget. This is one of the tools you will need to stay on top of your finances. Your budget will provide you with detailed income and expense figures to allow you to make informed financial decisions whenever you need to. Remember that there is nothing wrong when you need to make adjustments as long as you are continuously moving towards your goal.
Your financial health needs a regular check-up
It is important to conduct a regular financial check-up. This ensures that you are on track and making progress to reach your goals. You also need to do this if you have been making several changes in your finances. It can be doubling down on certain debt payments or even adding new payments to your budget.
One thing you can do is designate a money day where you tackle all your payments, check your budget, and even monitor your financial progress. Having one day for your finances keeps you focused. Doing it consistently will also make it a good financial habit. This can help you continuously keep track of your progress as you work your way towards them.
It is important that you champion and take the lead when it comes to your own financial health. No one else will do it for you. You set your own goals and you put together a plan of action to get you to where you want to be.