- Date : 28/04/2022
- Read: 5 mins
Stick to these rules to improve your financial health
Maintaining good financial health is utterly important. Good financial health keeps you afloat with your expenses and allows you to lead a stress-free and peaceful life. If you make bad financial decisions and stick to them, your financial health will keep on degrading. You should follow some universally tried and tested rules to stop this from happening. These are general rules, and everyone has tried them and got good results.
So without wasting much time, let's explore the financial planning strategies to improve your financial health.
Also Read: Financial Health - What does it mean and how can you measure it?
6 Rules To Improve Financial Health
1. Have A Budget
The first and most important rule to improve your financial health is to have a budget. Keeping a budget helps you track your money and stops you from spending more than you can afford. In the era of credit cards which reward you for spending more, it is vital to have a budget. Without a budget, you may lurk around aimlessly and end up going into debt chasing unnecessary expenses.
Having a budget and living under it will teach you money management like no other. So, if you are living without a budget, create a budget today because it is the first step in improving your financial health.
2. Invest A Lot
If you are capable and have funds sitting idle in your bank accounts, then it is time for you to start investing. Investing helps you create another source of income, and it also enables you to grow your money.
Investing is a two-edged sword, and you need to balance all the risks and rewards to improve your financial conditions with investment. Mindful investing can improve your financial health like no other. But if you go on an investing spree without due diligence, it can also inflict more damage to your financial health.
If you are a risk-taker, you can invest in stocks, cryptocurrencies, as they have the potential to generate high returns. On the other side, if you prefer to stay conventional, invest in large cap Mutual fuds and real estate that appreciates value.
Also Read: Top 7 Tax-saving investments to consider in 2022
3. Create Emergency Fund
Emergencies are normal, but the expenses that come with them may not be expected. Sometimes, emergencies cost a lot of money, and if you live paycheck to paycheck without emergency funds, you may suffer miserably.
Having an emergency fund will help you improve your financial health quickly. Your emergency fund should handle expenses that come out of the blue, and the fund should be considerable enough to handle multiple emergencies at a time.
Every month when you get your salary, put aside 10% to 20% of it in a safe place for an emergency fund. Even though the fund has grown, never stop saving money in that fund, as in the end, when you retire, all these savings will help in your retirement planning to live a tension-free life.
4. Stop Taking Debt
Another rule that you should strictly follow is to stop taking debt. No matter how strong your cash flow is, you should never take unnecessary debts. Even if you take debt, try to pay them off before the due dates.
Paying back debt is more challenging than acquiring it, so the first thing you should do is to get disciplined and learn to say no to debt. Debts come with heavy interest rates, and paying only the minimum amounts for a long time will affect your financial health negatively. You'll never come out of debt if you don't stop taking new debts, and this loop will burden you beyond imagination.
Stop taking debt, and if you have some debts already on your shoulders, then try to clear them as early as possible.
5. Spend Wisely
We often end up interpreting our wants as needs and making unnecessary purchases. To improve financial health, you should spend wisely and cut down all expenses that make no sense. As a working professional with limited income, it is pretty vital that you spend wisely and start saving money for all your future needs today.
The simplest way to identify whether something is a need or a want is not to buy directly when the thought comes. Instead, wait for some days and observe whether it is truly needed for you or simply an impulsive luxurious want you desire to complete.
If you can implement this method, you can inculcate the habit of saving money and spending it wisely.
6. Have Multiple Sources of Income
Another common rule to improve financial health is by building multiple income sources. Relying on a single source of income creates high dependency, and something goes wrong, you may end up in miserable situations.
Every person who leads a stable financial walk has multiple income sources along with their primary profession. With multiple income sources, you can plan your future better and save more money for needs and wants. Moreover, other passive income sources don't need you to work for money, and having multiple such incomes can provide you financial freedom.
You can have more income sources by running a business, working part-time, doing freelancing, owning real estate with rental incomes. These are just a bunch of common ways of having multiple incomes sources. If you explore yourself, you'll get more ideas for this.
Also Read: Financial Planning: 5 ways make to money in addition to your steady job
If you are determined to improve your financial health, it is better to abide by these rules and explore other rules that work for you. To be on the safe side always have your debt to income ratio between 20% to 35% as it will keep you away from unnecessary stress. Following all these rules will keep you on a straight path, and they will surely help you through the journey.
