When it comes to being financially prepared, there are many things that you can do. How you manage and spend your earnings are the foundation of building excellent money management skills and overall financial health. Those two categories are broken into smaller aspects for greater financial awareness and a better overall understanding of how money moves through your accounts. That said, follow this guideline to master financial health.
1. Budgeting!
A budget can take time to build and get refined with every passing month. A budget breaks down your monthly income (wages and earned interest) and spending into different categories. This way, you know about how much money comes in and how much is going out. This starts with your average monthly income and subtracts your necessary expenses. Some of these are rent, health care, car expenses, cell phone bill, and child support or childcare costs, to name a few.
Once you know the extent of your must-have expenses, you can start refining them to be more conscious of your spending. Downgrading your cell phone to a plan to one with less data or taking the bus to reduce car expenses can be great ways to eliminate excessive spending. This is one of the most significant rules to address since it helps all your other finances to fall into place. It doesn't mean that you have to deprive yourself of having fun, but it's important not to indulge too much. 2
2. Manage your Own Spending
Along with knowing how much your bills are and how you can refine your expenses, you also need to understand how you spend money. While most people try to stick to a budget, it can be very tempting to splurge on yourself with little indulgences. They can be things like eating out every day for lunch or that cup of coffee you buy every morning on your way to work.
How much are you spending every month on unnecessary extras? Can you shift your schedule to make more room for change? This can include little things like getting up 10 minutes earlier to make your own coffee at home and meal prepping your lunches for the coming week. Small adjustments like that can make a significant impact on your finances.
3. Needs first!
The most important things you need to prioritize are what you need for your own survival. This should include the basics, like food and shelter. In addition to those, other basics for our modern age, like healthcare and transportation, are things you also need to take into consideration.
If you can survive without it, then it is probably a want, not a need. That donut you buy on your way to work every morning is a want, not a necessity. You are responsible for understanding the difference and keeping yourself accountable.
4. Retirement Savings
Saving up for things can be hard and require a lot of self-discipline. Your retirement, however, is non-negotiable. If you have a 401(k) from your work you have somewhere to start, but will it be enough to keep you comfortable throughout your golden years? Saving outside of company-sponsored savings and having multiple streams of income is a must.
5. Have an emergency fund
An emergency fund is one you hope to never use. This is for the unexpected things in life like a health emergency or a car accident. They can limit your ability to spend on fun extras, but having an emergency fund will keep you out of your savings or incurring in debt. They are there to pay the bills when disaster strikes. This can also include a job loss or financial slump, so don't skip on it!
This is not for legal or financial advice. Please consult a legal or financial advisor for your specific situation.
