Financial health is the dynamic relationship of one’s financial and economic resources as they are applied to or impact the state of physical, mental and social well-being. (1) Good financial health means less worries and stress. In order to have financial health, financial literacy is required. Financial literacy is defined by the Council of Financial Literacy (2) as the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being.
6 THINGS YOU NEED TO KNOW REGARDING YOUR FINANCIAL JOURNEY
- Know how much money you are making, what you are spending and what you owe. A budget is an important tool for tracking what comes in and what goes out.
- BUDGETING METHOD 50/30/20 (3)
- 50% ON NEEDS
- 30% ON WANTS
- 20% ON SAVINGS
- Know your net worth represents all your assets minus your debts.
- Know that all decisions have an opportunity cost. Every financial decision from a $3 cup of coffee to $30,000 car involves a trade-off. Do you spend the money now on something you want but don’t need, or do you save it? If you need a new car, do you buy new or used? Pay cash, finance over time or lease? Every decision influences your ability to maintain today’s lifestyle goals or tomorrow’s income needs.
- Know your financial goals and your timeline for reaching each goal.
- Know your risk tolerance and the asset allocation that is appropriate for you. Your investment portfolio can help you move closer to your goals.
- Know where to get help.
To help you determine your financial health, the internet has numerous health assessment tools that can be located via Google. Many are from various financial institutions and after completing an assessment you may be contacted by one of them. But if you only review the assessment, you will be able to determine your financial health.
Are you financially healthy? Let us know what you do or need to do to stay financially fit! Write to email@example.com for a chance to win a $20 Amazon Gift Card.
We wish you lots of prosperity!
Eleanor Dietrich-Withington and the Healthy Nurse Healthy New Jersey Team