When planning and saving for financial goals like buying a house, paying for college, or retirement, it’s important to periodically assess your financial health and determine if you are on track to meet your financial goals. Reviewing your financial health gives you a gauge of how you are currently managing your money and what you might need to adjust to meet your future goals. This blog will discuss how you should review your financial health and the adjustments you can make to maximize your probability of meeting your future goals.
What Does it Mean to be Financially Healthy?
There are four key indicators of being financially healthy.
- Having sufficient income to meet your current needs by creating and managing a budget.
- Being able to handle both expected and unexpected expenses with an emergency fund.
- Having a financially feasible plan to pay off any debt over time (student loans and mortgages may take longer than a car loan).
- Making a financial plan that includes regular saving towards financial goals. These could be as small as saving for a weekend getaway or something larger like buying a home or saving for retirement.
While it is true that every person’s financial situation is different and that the scale of income, expenses, debt, and goals will vary widely, the same fundamental indicators can apply to everyone. Regularly assessing and adjusting these aspects of your financial life can help maintain and improve your financial health.
How Do You Know that You’re Financially Healthy?
There are other indicators you can look at to address your financial health.
- Do you have a steady flow of income?
- Do you have no debt other than your mortgage?
- Do you have a high rate of savings towards your financial goals?
- Is the cash balance in your savings account growing every month?
- Are you regularly surprised by running out of money?
- Do you save up for big purchases or rely on credit?
- Do you monitor the status of your credit report and credit score?
It’s about achieving a balance between saving, spending, and investing that aligns with your financial goals and circumstances. Thinking about the answers to these questions will give you a better sense for your personal situation and actions that contribute to your financial health. This can help you stay on track and make any adjustments as needed.
Tips/Tricks to Better Manage your Financial Health
If you want to improve your financial health, here are some tips/tricks that can help you. This will set you in the right direction to better prepare yourself for any unexpected expenses/changes that might occur along the way.
- Set financial goals that are realistic and measurable and adjust your habits to support them. Be honest with yourself about what is possible.
- Focus on increasing your income. Especially if you are young, your future income is your greatest asset. Invest in yourself!
- Create and stick to a budget that aligns with your goals and helps you save money.
- If you have any consumer debt, pay it off and avoid taking on any new debt.
- Track your spending and review your progress regularly to make sure you are sticking to your goals and budget.
- Make some sacrifices involving cutting spending, minimizing non-essential purchases (i.e., entertainment, eating out, online shopping, etc.), and lowering car, internet, and any other payments/costs across the board.
- Start an emergency fund (if you don’t have one) to help you deal with unexpected expenses.
- Consider participating in your employer’s HSA-eligible health plan
- Consider participating in your employer’s stock purchase plan (ESPP)
- If your income allows, contribute to a Roth IRA
This is going to involve a lot of discipline and persistence that might become challenging down the road, but it will ultimately help you achieve your financial goals. Remember, this is a gradual process and small steps taken consistently can lead to significant improvements to your financial health over time. If you need assistance with your tax planning or retirement planning in general, please reach out to our team”
Disclaimer:
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
Milestone Financial Planning, LLC (“Milestone”) is a fee-only financial planning firm and registered investment advisor headquartered in Bedford, NH. Registration does not imply a certain level of skill or training. Milestone works with clients on an ongoing, long-term basis, providing financial planning, tax planning, retirement planning, and investment management services. Fees are based on assets under management and may include a financial planning fee. Milestone receives no commissions or referral fees and, as a fiduciary, is required to act in clients’ best interests. Advisory services are offered only where Milestone and its representatives are properly licensed or exempt from licensure. More information, including fees and principal risks, is available in Milestone’s Form ADV Part 2A. For help with your investments or financial planning, contact one of our fee-only advisors.
