Gain confidence to improve your financial health with these tips
Many of us spend considerable time taking care of our physical health, going for regular checkups, taking our vitamins, exercising and eating nutritious foods. We feel much better when we get fresh air and reduce our stress levels.
The same can be said for our financial health. When we take good care of our finances, we feel more fiscally comfortable and confident. It’s important to plan for (and protect) our future financial health in the same way we manage our physical health: by developing and maintaining good habits.
If you’re ready to improve your financial health, here are some helpful tips to accomplish this:
Get periodic check-ups. Someone could walk into the doctor’s office looking healthy, but have an underlying, undiagnosed issue. Similarly, someone can look financially healthy — with a good job, nice home and fancy car — but be spending beyond their means.
If you don’t have a comfortable amount of savings in case of an emergency, you may be one leaking roof or burst appendix away from a financial crisis. Set up a consultation with a financial expert. Just as a physician will ask questions and conduct tests to evaluate your physical health, a financial expert will assess your financial situation and provide valuable advice and actionable steps on how to improve it.
Protect yourself. Do you have proper protection in place in case you get into an accident, get sued or are injured? What if you develop an unexpected illness and can’t work for an extended period of time, or ever again? What if you were to die unexpectedly and you’re the primary earner in your family?
Suppose your employer offers the equivalent of your salary in life insurance. If you make $100,000 per year, that likely won’t be enough to protect your family, so you’d need additional coverage. Ensure that you have the right coverage in the proper amounts, including property, casualty, medical, disability and long-term care insurance. While it may be unpleasant to think about an accident, illness or sudden death, it’s important to be prepared for any eventuality. Ensure you and your loved ones are protected for any possible scenario to create peace of mind. Be sure to do these things now before you need them.
Secure the proper legal documents. Again, it may not be the most pleasant topic to consider, but execute the proper legal documents — including a will, Power of Attorney, and trust — in case you’re injured, incapacitated or die.
Business owners also need a business continuity agreement. And while these documents are critically important, many people don’t have them in place, either because they don’t think to get them, or perhaps they believe that nothing bad will ever happen to them. Trust me: Set up these documents now, just in case.
Manage risk. Consider your asset allocation and product diversification. Don’t just own stocks and bonds; have other revenue streams that will provide income. As we’ve seen over the past few years (and decades!), the stock market fluctuates, and it’s wise to diversify your assets.
Also, be aware that risk management may evolve as you age. A 30-year-old can often take bigger risks with their stock portfolio, because they’re years away from retirement, but a 60-year-old may want to be more cautious, as they have less time before they’ll need to tap into their retirement savings.
Save money. Determine how much money you have coming in, your living expenses and your savings goals, then do an analysis. If you’re spending 110% of what you’re making, it’s a problem. Ideally, you’ll want to save 15-20% of your income. If that’s not feasible, save what you can, even if that’s 5%.
As you get raises, put a higher percentage of your salary towards savings. If you’ve been paying $1,000 towards credit card debt, once that debt is paid off, continue to pay that $1,000 into your savings account. Automatically transfer a set amount from every paycheck into savings. Even small efforts will add up over time.
Sleep soundly at night. Some people can’t sleep at night because they’re worried about their financial health. If you have the proper protections in place — including the right insurance, legal documents and savings — you’ll have the peace of mind that financial security can bring. There’s comfort in proper preparation, and that will allow you to sleep like a baby.
Maintaining good financial health doesn’t just “magically” happen. It takes discipline, good habits and consistency, just like maintaining good physical health does. Prioritize your fiscal health, similar to how you focus on getting stronger and healthier physically, by consulting with financial experts and following their advice, getting regular checkups, putting proper protections in place and saving money. By practicing good fiscal habits, you’ll feel much better on a daily basis.
Joseph H. Guyton is principal of The Guyton Group in Portsmouth.
