5 Rules to Improve Your Financial Health
The term “personal finance” refers to how you manage your money and plan for your future. All of your financial decisions and activities have an effect on your financial health. It’s always important to consider what we should be doing—in general—to help improve our financial health and habits..
1. Do the Math—Net Worth and Personal Budgets
Money Comes In, Money Goes Out. For many people this Is about As Deep As their understanding gets when It comes
To Personal Finances. Rather than ignoring your Finances and leaving them To chance,
a bit of number crunching can help you evaluate your current Financial Health and determine how to reach your Short- And Long-Term Financial Goals..
2. Recognize and Manage Lifestyle Inflation
Most individuals will spend more money if they have more money to spend. As people advance in their careers and earn higher salaries, there tends to be a corresponding increase in spending, a phenomenon known as “lifestyle inflation.”
3. Recognize Needs vs. Wants—and Spend Mindfully
It’s in your best interest to be mindful of the difference between “needs” and “wants”. Needs are things you have to have in order to survive: food, shelter, healthcare, transportation, a reasonable amount of clothing. It's also important to set aside money each month for savings, although that is much more contingent on your other needs being met first.
4. Start Saving Early
It’s often said that it’s never too late to start saving for retirement. That may be true (technically), but the sooner you start, the better off you’ll likely be during your retirement years. This is because of the power of compounding.
5. Build and Maintain an Emergency Fund
An emergency fund is just what the name implies: money that has been set aside for emergency purposes. The fund is intended to help you pay for things that wouldn’t normally be included in your personal budget. This includes unexpected expenses such as car repairs or an emergency trip to the dentist. It can also help you pay your regular expenses if your income is interrupted.
