What is financial health?

3.08.2022
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финансовое здоровье

Every modern person should be able to manage their money correctly. This skill will give him confidence and a sense of security, as he will be able to cope with any difficulties. How can I check my financial health? What do you need to do to learn how to manage your money correctly?

A person’s financial health refers to the state of personal funds. For a favorable and safe future, you should take into account not only the physical and mental indicators of your body, but also your financial situation.

According to statistics, only a small part of the indigenous population of any country is financially healthy. As for the majority of citizens, they mostly live from paycheck to paycheck, so they are not ready for the crisis and quarantine.

What are the signs that indicate a poor financial situation?

Checking your financial health is quite simple. Below we will list the most common symptoms that indicate that it is under threat.:

  • you don’t keep track of your money, and you don’t even know how much you spend each month;
  • you don’t have a source of passive income;
  • do you often use the services of micro-credit organizations or banking institutions;
  • don’t use cashback;
  • the return on your investment is not enough to cover inflation;
  • in the event of a breakdown of household appliances, you will be forced to take out a loan.

When assessing your financial situation, make sure to analyze whether the budget meets your expectations. The main criterion in this case is financial goals.

In order to determine whether a person manages his funds correctly, it is necessary to analyze the extent to which he managed to adjust his capital to the goals and objectives set. They may all be different, so people’s actions may differ. For example, a person who plans to purchase real estate in the future will behave more restrained, unlike those who are trying to save up for a decent old age or increase their capital.

How can I improve my financial situation?

financial health

If you often use credit services, then you should reduce your debt payments to 20% of your income.

To assess your monetary health, you need to calculate the amount of capital, this includes the property that is in your possession. Add up all your assets, including:

  • real estate;
  • deposits;
  • cash and cash equivalents;
  • investment.

Then calculate the amount of total debt. Don’t forget to add credit cards, debts that you have to pay back to your friends, mortgages, etc. After you take out the debt from your main assets, you will receive equity. If you have purchased an apartment that costs $ 80,000, but you have to pay a mortgage of $ 60,000, then the capital will be equal to 20,000.

Trying to get out of the debt hole, you need, first of all, to deal with the most “expensive” loan and pay it off. If the opportunity arises, then try to refinance the debt. That is, take out a new loan and pay off the old one.

Why do you need a financial airbag?

Any person should have a reserve of funds that they can use in case of unforeseen situations. If you lose your job, you will always have savings on which you can live and not “hang up” on debts.

To calculate the airbag, follow these steps:

  • determine the time during which you may have financial difficulties.In most cases, a person takes 5-6 months to find a new job or clients;
  • calculate how much money you spend each month.Permanent items of expenditure should include food, utilities, travel, loan payments, mobile communications, etc.The amount received must be multiplied by the number of months of the financial crisis.

The airbag can not be used for large purposes, even if it concerns the purchase of a car or apartment. These tools will provide security and confidence in the future.

If you have already taken care of the airbag and saved up money for the implementation of short-term goals, then it’s time to think about investing. With just $ 1,000, you can build a portfolio of several instruments that will consistently generate passive income.

How to save up for a decent old age?

financial condition

Many young people are already beginning to save 10% of their income for retirement. With the help of banking applications, you can set up automatic deductions from the current account to the deposit, so that nothing prevents you from saving for old age. You need to select the date and amount of the deduction.

To increase your savings, you can consider long-term investments. Some prefer OFZs and corporate bonds, while others prefer stocks and ETFs. The resulting passive income can be reinvested again. It is recommended to review the portfolio once a year.

How to increase your personal finance money?

As income increases, spending increases, a phenomenon called lifestyle inflation. If you have been promoted in your career, then you will probably want to move from a one-room apartment to a two-room apartment or go on a trip. However, you should take into account the fact that with the increase in inflation, you will still live without a personal car and your own apartment, even if your salary has increased several times.

An economically competent person should be able to distinguish needs from desires. The first category includes food, housing, medicine, transportation, and clothing. When planning your personal budget, you need to take into account loan payments, mandatory expenses, and savings for specific purposes. Your entertainment expenses should not exceed 30 percent of your income.

It is not superfluous to purchase insurance. It will protect you and your property from unforeseen situations that can knock you out of your usual way of life. Without good insurance, people can be left penniless. In life, there are fires, accidents, theft and many other troubles. How does it work? If you have taken care of accumulative life insurance, that is, you have insured your life and health, then in the event of an injury, illness or death, you or your relatives will be able to receive money to cover the damage. If there is no accident, you can return the invested funds at the end of the contract term.

From all of the above, the following main points can be distinguished:

  • financial health refers to the state of your personal “wallet”;
  • if you haven’t yet adjusted your capital to meet specific goals, then it’s time to start planning your budget;
  • monetary security includes an airbag, insurance, retirement savings, etc. Remember that loan repayments should not exceed 20% of the income received.

These simple recommendations will help you stay afloat even in times of crisis.

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