Once upon a time, there was a broke college kid balancing her last semester of classes, 3 part time jobs, and she had a frugal wedding to plan…BLECK!
I was going to tug at your heartstrings with my story of being poor 15 years ago to explain what financial health means to me. But the world is already full of emotional examples of being broke. According to CFSI’s Consumer Financial Health Study, 57% of Americans—approximately 138 million adults— are struggling financially. That said, do you know what financial health really means?
Financial health means being able to take a day off to binge watch Orange is the New Black (true story…every year, lol). It means never waking up in a cold sweat wondering if today is the day the bank takes your house (yep, I sleep like a baby!). It means not staying at a job you hate to make enough money to scrape by (I left a dead end job of 6 years to tackle my own businesses in July 2011).
SCREW SCRAPING BY!
Financial health means grabbing your fiscal future by its balls. Seriously.
The first step is to prioritize. It’s hard to achieve a goal if you haven’t set one. And it’s hard to set goals if you don’t know what you truly want. Make a list of the most important people, activities, and things to you.
Handle the Money Stuff
If you are asking me for advice on how to pay for your kid’s dental work while he’s walking around in $200 sneakers or you are whining about not having fun money during your smoke break, then your future is totally up for sale by whoever has the money to buy it from you. Sorry, the truth sucks.
Here’s what is involved in becoming financially healthy:
- Spend less than you earn. Create a realistic budget that includes savings and your daily priorities. You can cut the waste or look into other income options – side hustles like pet sitting, a better-paying main job, renting out a spare bedroom or area of your home, etc.
- Create an emergency fund of at least $5000 since that can handle most of life’s pop up crap. Then save your way to 3-6 months of living expenses (if that’s higher than $5000).
- Take inventory of your debt. All high interest debt goes on the slaughtering list.
- Make note of your retirement account options. ALWAYS contribute the minimum to receive the maximum company match on your 401k. Then look into Roth IRA’s, regular IRA’s, and/or a SEP IRA if you are self-employed. Ask around for options that fit for you.
- Diversify your investments. Never invest everything on one thing. It’s way easier for one thing to fail than for multiple things to fail at once.
- Insurance matters. At the bare minimum, you should have home, car, health, and term life insurance. Then look into coverages specific to your situation – dental, short and long term disability, umbrella policies, etc.
- Look into estate planning. If you have children or major assets, you need to have a legal will and plan in place.
Last, Most Important Step – Are You Happy?
Once all of those boxes are checked off, review your plan regularly. Personal finances have to reflect your personal situation. Make sure you are budgeting in happiness above all else.
My ultimate happiness is taking control of what I can so I can handle what I can’t.
What does financial health mean to you?