This is a term you’ve probably heard or seen before, but what exactly is financial health? Well, in a nutshell, it is the overall state or “health” of your finances. It’s an overview of what kind of financial shape you are in and what kind of financial security you have. But how exactly is it calculated and how do you know what kind of state your financial health is in? Well, we are here to break it down for you. Below we will examine how financial health is calculated, how to tell if you’re financial health is in a good or poor state, and how to improve your financial health if a few areas need a little work.
How is financial health evaluated?
When calculating your financial health, you must examine all the various aspects of your finances. This will include your savings and investment accounts, your expenses and spending habits, your debt, credit rating, and the overall effectiveness of your financial planning. In a perfect world, all of your finances would be handled automatically but this is not the case. Having good financial health (and maintaining it) is a lot of hard work.
Are you in good or bad financial health?
One very simple test to help you decide whether you are in a good or bad financial standing is by evaluating your current financial situation and how you feel about it. If thinking about your finances gives you a lot of stress and anxiety, this is a sign that your financial health may not be as good as it can be. Another way Is by evaluating your net worth. For this, all you need to do is add up the value of your assets, savings, and investments, and subtract the money that you owe (such as debt or any outstanding loans). If you’re in the positive, that’s great, if you’re breaking even or sitting in the negatives, there’s some work to be done.
How to improve your financial health
If your net worth is sitting in the negatives or you would like to improve your financial health, there are a ton of options to help you get there. One of our mottos here at 4 Pillars is that a debt-free life is possible. Canadians have tolerated debt as a way of life for too long, and it’s time to put an end to it.
These are just a few simple ways you can improve your financial health before diving deeper into consolidating your debt with the 4Pillars team:
Create a budget for yourself:
If you’re spending more than what you’re bringing in, start budgeting your money and cut unnecessary expenses where you can. As an example, let’s say during the work week you go out and spend an average of $10 on lunch. That’s $50 a week or $200 a month. What may seem like a small amount can add up very quickly.
Pay off high-interest loans/debt first:
If you have a lot of outstanding debt and loans to pay off, it’s best to organize them and decide which ones have the higher amount of interest owing or the highest interest rates. Focus on paying those off faster to save yourself some money on interest charges. And, for more information on how to pay off your debt, click here.
Save and put aside money:
Wherever you can, try to save money and have a separate account set aside for unexpected emergencies. Think about what your long-term goals are and start putting money towards making those goals a reality. Some people even like to have two separate savings accounts. One for goals and one for emergencies.
If you’re ready to improve your financial health and lead a debt-free life, we can help you at 4 Pillars! We can show you what steps you need to follow, to take back control of your finances and consolidate your debt. When it comes to the fight against debt, you are not alone. So, let’s start the conversation today. Book a free consultation with us at one of our three locations. You can reach our Muskoka & Parry Sound office at 705-640-0187, our North Bay office at 705-980-0158, or our Sudbury office at 705-806-1252. A debt-free life is possible. Take the first step today.