17/04/2024

LACCM

Information about Business World News

What Is Financial Health?

3 min read

Financial health is a term which is frequently used to describe the state of personal finances. There are many different contributing factors when it comes to procuring positive financial health, such as savings, retirement funds and how much of your income is used towards paying debts.

Of course, each person’s circumstances are different, so there is no one goal which defines positive financial health, however, there are small steps and changes that everyone can make towards bettering their financial health. Let’s take a look at what financial health is and how you can improve yours.

What Is Financial Health?

Financial health is classed as the current state of your financial situation and how the money coming into your bank account is spent, as well as how prepared you are for any unexpected financial events and how much is paid towards paying off debt and overdrafts. It can, however, be measured in a number of different ways and there is not one ultimate goal for being financially healthy. It, ultimately, comes down to how comfortable you are financially and your preparedness and planning for the unexpected.

How Can I Improve My Financial Health?

Everyone can work towards improving their financial health and, in order to do so, you must first take a look at where your finances currently are honestly and openly.

Budgeting

The first step to take when looking to improve your financial health is to create a budget. It’s no good winging it each month – you should be able to look at your monthly income and be able to work where it is needed for that month. Don’t just plan your future spending, either. It’s important to also take a look at what you’re currently spending.

You might not realise just how much you’re spending and can easily cut down, or you might have a recurring subscription coming out each month that you no longer need. You can look to budget the traditional way using paper, or there are numerous different apps and online templates that you can use to get your budgeting in order.

Debt Management

Using either the snowball or avalanche method, it is important to work towards paying off your debts in order to achieve positive financial health. Clearing or reducing your debts, particularly high-interest ones such as credit cards and overdrafts, should always be at the top of your priorities when it comes to managing your finances. There are some easy ways in which you can better manage debts, such as by moving a high-interest rate credit card to a new provider with 0% interest, but it is still quite a sensitive subject. A lot of people in debt aren’t too sure about what’s best for them in terms of management and reduction, so in this case, a chat with a financial debt advisor is recommended. They might be able to suggest options such as a DRO or debt management plan to help you with your debts.

Consolidate Pensions

People rarely stay in one job for a number of years these days and, as a result, may have numerous different pension accounts in their name. To make life easier for yourself and to better manage your finances when the time comes, look to consolidate your pensions all into one account. This can be a hassle to organise, but once done, it is much easier to track and means that you can avoid any transfer fees in the future when you come to redeem.

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