Everyone wants to be financially healthy and financial literacy is the first step towards becoming financially healthy. Having a good understanding about financial products and making the right investments at the right time may create a path for becoming financially healthy.
In the recent times after the Covid-19, everyone has been affected financially more or less. Once a financial evaluation is done everyone would start taking serious steps in controlling their money moment. No matter how much you earn, it is important to have money when you need it most for your desires or urgent needs. Here in this article, we present you with five ways in which you can control your finances and become financially healthy.
- Find out from where you want to start
- Instruct your money to work for you
- Spend lesser than your earnings
- Future plans
- Be generous
1. Find out from where you want to start
Having a desire to control your finances is a great way to become financially independent. Understand your financial situation and make an action plan towards it. Prepare an assessment of your assets and liabilities. Know how much money you have to pay to the debtors. Debtors can be in the form of personal loans, credit cards payments, home loans and any forms of regular debt payment.
Similarly, find out the assets meaning your cash reserves, property and wealth. Once you have an understanding of your assets and liabilities then you can know where you have to start from. If you have more liabilities then you should focus on clearing them and then build assets. If you have more assets than liabilities, then you should manage to multiply the assets and increase your assets.
2. Instruct your money to work for you
If you want to improve your financial situation you should instruct your money to work for you. Make a budget for your monthly expenses and direct your money towards meeting the expenses. Plan every penny of your earnings towards your expenses. With a budget plan you can tell your money where you want to go and fulfill your desires.
Money will not come and settle into your pocket. You have made a lot of effort in earning it, so also make efforts when you are spending your money. Debt payments do not happen; you have to intentionally direct it towards payment. Plan and start living within your budget. It will help you to achieve your dreams.
Click here for Bad money habits to avoid right away
3. Spend lesser than your earnings
It is difficult to spend less than you earn but it is a wise living if you’re planning towards it. If you are spending less than your earnings then you are not contributing towards taking out a loan to meet your monthly expenses. If you are spending more than your earnings then you have to take personal loans, use credit cards for managing your monthly expenses.
Over a period of time the debt amount will continue to increase and you will fall into the debt trap. Payment of loans will become difficult and you will have to manage your monthly expenses and also pay loans. If any emergency financial situation comes up then you should also be ready to meet those expenses. Having an emergency fund will however help you but if you do not have any emergency funds then you will become debt ridden. To have control over your financial health, spend less than your earnings.
By spending less than your earnings the remaining earnings will go towards savings accounts. The money in your savings account will work towards building your cash reserves and these cash reserves will become financial assets over a period of time.
click here to know 8 reasons why one should have a savings account
4. Future plans
If you have a huge amount in your savings account this can come in handy when you need it the most. Apart from this having an emergency fund with a large amount of fund investment into account will be a safe step during your financial emergencies. Spending money wisely is a very important factor. When you spend money, calculate the outcome of the expenditure. Many people make a lot of savings and do their spending on depreciable assets such as buying a car. The value of a car decreases year after year and there are a lot of maintenance expenses associated with it.
Having a car is a requirement or luxury that is different, but spending all your life savings and buying a car is a point to think about it again. When you spend money with a vision of a future plan, then spend it wisely so that money you spent will multiply over a period of time.
Make the right investment decisions at the right time. Have an emergency fund that will protect you from unexpected expenses. It will provide you emotional support if you have a financial backup for yourself.
5. Be generous
If you are focusing only on saving money and not spending then you will become a miser. Becoming a Money miser will affect your financial health. Living life from selfishness to selflessness will reduce your stress and you can become happier living a contented life. It does not mean that you should donate all your money that you’re earning each month.
Being generous is better than being miser. The act of earning and spending will keep the money rotation in the society. It will not create artificial demand and this will help in maintaining a balanced money control in the society. If you are living generously with open hands it will keep money in the right perspective.
Take away
The first thing towards controlling your financial health is to change your habits towards building a healthy financial life. Have a commitment to increasing your assets and reducing your liabilities. If you are having lesser debts and more assets then you are towards building a financially independent life. The efforts that you put in earning money put equal effort when you are spending that money.
Money will help you to achieve your goals and to achieve them, focus on what you’re spending and how much you’re spending. Think over and answer if it is worth it to spend on it and move on to build a secured financial future.
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.
