How to Improve Your Financial Health
Personal finance refers to your own finances: how you manage your money and plan for your financial future. Everything you do and everything you spend money on has an impact on your financial health, which will ultimately impact your future down the line. It’s vital to consider your plans to manage your financial health, habits, and future, so here are a few ways you can do so.
The first thing you need to do is calculate your finances rather than leaving them to chance. Personal financing is more than what you spend versus what you earn per paycheck — knowing your net worth can tell you the difference between what you own and what you owe. It lets you know where you are financially at the moment and can fluctuate over time, so calculating this on a yearly basis will allow you to evaluate your progress, successes and figure out what needs improvement.
With this figured out, you should develop a personal budget or spending plan for a monthly or annual basis. A personal budget can help you plan for, reduce, or eliminate expenses, save for future goals, plan for emergencies, and much more. All of this comes from making projections for your income and expenses. To truly understand where you are financially, calculate your net worth and personal budget regularly to avoid overspending and ending up in debt.
Keep in mind what you want versus what you actually need. All money has its limits, so keeping this in mind will help you make better spending decisions. Your needs are things that you must have in order to survive: food, water, shelter, healthcare, transportation, and so on. Meanwhile, wants are things that you would like to have but don’t necessarily need for survival.
Sometimes the line between wants and needs grows blurry; you may need a car, but want a luxury vehicle. When you come across situations like this, keep in mind that spending unnecessarily on a “need” still qualifies as a “want” and is something you can avoid. If you have money left over after paying for everything you need, you can treat yourself to wants — though keep in mind that you don’t have to spend it all.
