Interested in increasing your financial health? Forbes.com has some solid suggestions to help you down that road.
Do you know what your net worth is? To figure this out, you'll need to determine the difference between what money is going out, and what money is coming in along with your assets.
This amount will change as time goes on, so you'll need to keep track of this on an ongoing basis. Calculate your net worth at least once a year.
Once you know your present net worth, you can move on to working out a budget, both monthly and yearly.
Instead of blindly making expenditures hoping for the best, this will help you plan for your spending, and hopefully to also cut out some expenses.
You'll then be better able to plan for the things you want in future, as well as have funds for emergencies.
To help plan a budget, keep track of your bank and credit card statements for three months or more. Be sensible about credit. Make payments on time, and be disciplined about taking on more credit card debt.
Paying down high interest debt will have long term benefits. Look into refinancing and renegotiating interest rates. When one debt is taken care of, don't reduce the amount you're putting to paying off debt.
Instead continue to apply those amounts to other debts, starting with the one that has the highest rate of interest.
Insurances of various types can be a big outgo, but don't skimp on them, or underestimate the amounts. Do the research to make sure the coverage you have for home, car, health and other insurances are realistic, and fit your needs adequately.
After you determine your expenses you'll know what you have left over to work with. This will enable you to be realistic about what you can save, invest, and spend safely.
Being able to discern the difference between what you want and what you need will allow you to get a healthier handle on your finances.
You need to have enough money to pay for shelter, food, clothing, transportation and health care, for instance. These are matters of survival. After you've allocated funds for these things, you can better decide which things you want are attainable.
Make sure to consider saving for the future, before your wants. Especially in your big purchases, like a car or a house, don't splurge for the short term pleasure of it.
When buying a house, for instance, be ruthlessly realistic about what you can afford. Don't put yourself into a tight spot by purchasing a house that costs more than you can manage within your budget.
The earlier you start to put away savings, the more compound interest will accrue for you. Down the road, you'll be glad you did.
Emergencies are by definition sudden and unexpected. They happen to everyone at some time or other, so expect the unexpected and plan your finances accordingly.
Traditionally, a goal of having three to six months of living expenses set aside for emergencies is a reasonable one.
But more is better. If you can make savings a regular part of your budget plan, your emergency fund can grow regularly and consistently.
Financial health doesn't stop with the end of life. When the time comes, you'll want the money that you were so careful with to end up in the hands you want it to go to.
Estate planning may not be appealing but it needs to be done. Think about things like having an advanced health care directive, and make plans for a suitable power of attorney should the need arise.
Prepare a will to ensure that what you want to go to your children and other loved ones, or to charities or other recipients will actually go to them. Keep these plans up to date, since needs and priorities can change as life goes on.
Don't be afraid to spend the money on legal help. Use the assistance of attorneys where appropriate to make sure your plan is what you want.
Sources:
Five Rules To Improve Your Financial Health. Forbes.com. Retrieved April 6, 2014.
http://www.forbes.com/sites/investopedia/2013/11/26/five-rules-to-improv...
14 Financial Resolutions For 2014. Forbes.com. Retrieved April 6, 2014.
http://www.forbes.com/sites/financialfinesse/2013/12/27/14-financial-res...
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Reviewed April 8, 2014
by Michele Blacksberg RN