5 Tips for Improving Your Financial Health
Collaborative Post
The term personal finance refers to how a person manages their money for future use. The financial activities and decisions that you make today have an impact on your financial health in the future.
When spending your money, you should always be guided by some standard financial rules such as, don’t spend more money than you earn or invest a portion of your income.
Since many of these financial principles are tried and tested, I thought it would be useful to share or remind you of some of them.
1. Differentiate between a needs and wants
Unless you have a lot of wealth, you should always distinguish between your needs and wants. This will enable you to make well-informed spending choices.
Needs refer to the essential things for survival purposes such as food, healthcare, shelter, clothing, and transport.
Wants refer to the things that you wish to have but aren’t necessary for your survival. It would help if you always prioritize your needs and then spend on your wants.
But, you also don’t have to spend all your weekly or monthly income after paying for your needs.
For instance, someone’s want may be to own a classic motorcycle (actually I have a BMW motorcycle as one of the things I want to own). You can obtain valuable information about motorcycle panniers by visiting reputable dealers’ websites like: https://bmw.europe-moto.com/gb/44-motorcycle-panniers-bmw-motorrad
2. Determine your Net Worth and Personal Budgets
Tracking my net worth is a new exercise for me, I started it in 2020 and do it with my monthly bank account check in because it helps me see how I’m doing with my assets and investment portfolios. I can also keep track of how my investments are performing, which actually motivates me to keep going.
You must determine your financial ability and develop a plan to achieve your short-term and long-term financial objectives. Avoid overlooking your finances and leaving them to chance.
Your net worth is a representation of your current financial ability, and it may fluctuate over time. Although it’s beneficial to calculate your net worth once, you can only determine the actual value by making regular calculations.
Regular net worth calculations enable you to determine your progress, outline your success and detect areas that need improvement.
3. Recognize and Manage Lifestyle Inflation
Most people spend more money when their income increases (lifestyle creep/ lifestyle inflation).
Although you easily pay your expenses, lifestyle inflation can be destructive in the long run because it restricts your ability to create wealth. The current extra amount of money you spend results in a lesser amount in the future and during your retirement.
4. Start Saving Early
Although it’s never too late to start your retirement savings, the sooner you begin, the better. The earlier you start saving, the more money you will have for your retirement.
5. Create and Maintain an Emergency Fund
An emergency fund refers to the money that you set aside for emergency reasons. This fund is intended to pay for any sudden expenses that aren’t included in your budget. They may include repairs and medical needs.
An emergency fund is also helpful in paying for regular bills in case your income flow is interrupted.
Conclusion
You can achieve your financial objectives by using the above personal finance management tips. It’s essential to always focus on the big picture and develop a financial discipline. General habits can also help you make better financial choices.
