5 Tips On How To Improve Your Financial Health
Whether you are stuck in a cycle of debt, you are not earning enough to sustain your desired living standards, or you simply want to save up towards a goal(s), like buying a car or home, investing or embarking on a pilgrimage, all these, need you to be intentional with your finances.
While your finances do include a lot of big, long-term goals like these, your financial health is also made of many smaller goals, decisions, activities and habits that are much easier to manage. Note: Because they’re small, it does not mean that they don’t matter. But, here’s the good news: Taking care of the small things is what improves your long-term financial health.
Here are five tips on how to boost your financial health
You Are A Business: Whether you are an entrepreneur or not, employed or not, you are your first business. You possess skillsets that you exchange for financial compensation, just like business exchange products or services.
Like formal businesses, you have to monitor your expenses and income. For businesses to be profitable, their revenues need to be greater than their expenses. As a person, if your expenses are consistently greater than your income, you will always be financially unhealthy. So, live within your means.
Pay Yourself: Knowing that you are a “business” will help you understand that your salary is barely your revenue and not your profits. You are supposed to cater to all your “business” expenses such as rents, feeding, transportation, and utilities from your salary. It is therefore imperative that you pay yourself too. Part of what you earn is yours to keep.
There are different frameworks that talk about paying yourself (savings) such as the 70–20–10 rule. According to this rule, divide your income into 70% living expenses, 20% savings and 10% for anything else.
Make your money work for you. Once you have mastered your spending and are consistent with paying yourself (savings), the next step is to put your savings to work. Think of this as creating an army of dollars, all working for you, night and day, to conquer more dollar territories.
As your savings pool and interest in investing increase, investment opportunities will begin to emerge — some good, some bad and some, undoubtedly by con-men. Like a good General, it is your responsibility to ensure that you send your army into territories they can conquer. Investing is a long term game, and the “get rich quick” mindset will only set you back. As legendary investor Warren Buffett likes to say, “It’s pretty easy to get well-to-do slowly. But it’s not easy to get rich quick.”
Invest in Yourself: There are two ways to come out ahead in the personal finance equation — spend less or earn more. To earn more, you need to improve what you bring to the table. There is a saying that “knowledge is power”. The more you know, the more you can earn.
Investing in yourself is the engine for your growth. Whether you are learning a new skill or you are learning how to invest your money, knowledge has the power to grow your wealth exponentially.
Life is Short — Enjoy it. Life is happening now, not yesterday, not tomorrow. Money concerns tend to be overwhelmingly future-oriented. In this way, an obsession with a financially stable future can rob you of the pleasures of today. This is why it is so important to enjoy life now.
No matter how grand your future plans may be, the biggest X factor is that you do not know how much time you will have in your life. That does not mean that you should live life with a fear that you may die tomorrow, but rather accommodate other possibilities.
Balance is key, and you can’t just focus on the future.
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