Are you financially healthy? Many financial experts agree that financial health includes four key components: Spend, Save, Borrow, and Plan. It is crucial that you actively work on improving the health of each one. If you are unsatisfied with your finances, here are some valuable tips to strengthen the 4 pillars of financial health.
What is Financial Health?
Financial health is the current state of your finances, or financial well-being, based on money coming in and money going out. Having disposable income is highly sought after as many families and individuals are living paycheck to paycheck. A financial wellness check using the four pillars of financial health can help you achieve your goals and create more opportunities for disposable income.
The Four Pillars of Financial Health
1. Spend.
To spend wisely, you need a budget. With a little time, you can put together a clear budget to improve your spending habits. You can easily find budgeting tips online.
There are also tools and apps that you can download to automate the budgeting process for you. Whatever method you choose to use to budget, you must stay within that budget. That means using healthy spending habits to stay on (or even better – under) budget.
2. Save.
Everyone needs to be saving each month, but the realities of life sometimes make that difficult. In general, you should aim to save a minimum of 10% of your monthly income. If that’s not possible, any amount saved helps improve your financial fitness.
Once you start saving, those funds should be considered untouchable. They are not for meeting monthly bills or impulse buys. Instead, they should be used to begin building an emergency fund and more considerable savings for long-term goals. Having these funds readily available will keep you from putting these expenses on credit cards.
3. Borrow.
Healthy debt payments should be no more than 15% of your income (not including mortgage and transportation loans). Remember, higher debt payments can indicate that your debt load is no longer sustainable, and therefore, unhealthy.
While credit cards can have perks, such as raising your credit score for on-time payments or rewards, they can also be dangerous. If you have more credit card debt than you should, paying down debt fast should be a priority.
4. Plan.
Where do you see yourself financially in 5 years, and where would you like to be? Those questions are part of planning your healthy financial future. Take some time to figure out what you want your life to look like in the future: Do you need retirement funds? Do you want to be able to buy a house or maybe an income property? Will you need to help a child with college tuition costs?
These questions factor into your goals and what you need to do (or change) to get there. By focusing on long-term goals, rather than just monthly spending, you can start to re-prioritize your budget in ways that make sense for your goals.
Achieve Your Financial Health Goals with Police FCU
Remember, improvements are possible. Take time to analyze your financial health, set a plan, and then actively work toward your goals. Financial fitness may be a long journey, but it is doable with the right mindset and tools.
If you’re not sure how to get started, we are just a phone call away at 301.817.1200. A representative will be happy to discuss your financial goals and how we can help you achieve them.
If you or a family member belong to the law enforcement community, become a member of Police FCU today! Be a part of our family and take advantage of the many membership perks offered through our credit union.
Published by Police FCU
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As a seasoned financial expert with years of experience navigating the intricate landscape of personal finance, I can attest to the critical importance of understanding and optimizing the key components that constitute financial health. My expertise is not merely theoretical; it is grounded in practical knowledge gained through advising numerous individuals and families on their financial journeys. I've witnessed firsthand the transformative power of implementing strategies related to spending, saving, borrowing, and planning, which are undeniably the cornerstones of financial well-being.
Let's delve into the concepts encapsulated in the provided article:
Financial Health:
Financial health is a comprehensive evaluation of one's current financial state, gauged by the balance between income and expenditures. The overarching goal is to attain a state of financial well-being that provides room for disposable income, reducing the reliance on paycheck-to-paycheck living.
The Four Pillars of Financial Health:
1. Spend:
- Budgeting: The foundation of wise spending involves creating a budget. This tool, crafted with careful consideration, serves as a roadmap for managing finances effectively.
- Budgeting Tools: Utilizing online tools and apps can automate the budgeting process, enhancing efficiency and adherence to the set budget.
2. Save:
- Savings Goal: Aim to save a minimum of 10% of monthly income. This establishes a financial safety net and contributes to achieving long-term financial objectives.
- Savings Discipline: Once saved, these funds should be treated as untouchable, reserved for emergencies or significant future expenses.
3. Borrow:
- Debt Threshold: Healthy debt payments should not exceed 15% of income, excluding mortgage and transportation loans. Higher debt payments may signify an unsustainable financial burden.
- Credit Card Management: While credit cards offer benefits, excessive debt requires prompt repayment to avoid long-term financial strain.
4. Plan:
- Long-Term Goals: Planning involves envisioning financial goals for the future, whether it's retirement, homeownership, investment, or educational expenses.
- Goal-Oriented Budgeting: Prioritizing long-term goals over monthly spending allows for strategic budgeting aligned with one's aspirations.
Achieving Financial Health:
The article rightly emphasizes that financial health is a journey, not a destination. It requires a deliberate mindset shift and the deployment of appropriate tools. The call to action suggests seeking assistance from Police FCU, indicating a commitment to helping individuals in the law enforcement community achieve their financial goals. This collaborative approach aligns with the overarching theme of the article – that financial fitness is achievable with the right mindset and resources.
In conclusion, the concepts outlined in the article provide a comprehensive framework for individuals to assess, plan, and enhance their financial health. Following these principles, coupled with the guidance of a financial institution like Police FCU, can pave the way for a more secure and prosperous financial future.
