Debts, fees, interest, taxes, and many things involving money can create a not-so-good feeling regarding finances for most people. That’s why so many citizens tend to not compromise too much with it and don’t have good financial health, which, in turn, can lead to many bad consequences.
Creating a good relationship with your expenses and becoming a good money manager is not easy but it can bring great benefits. Understanding where you stand right now and where you want to reach, both financially and in other aspects of life, is essential. Learn more below.
What is financial health?
For many people, money is just money: you get it, you spend it, done. However, if they learned more about personal finances, they’d understand how many more opportunities their money could give them if managed properly.
On the other hand, some people might even try to make the most out of what they can get, but always end up spending more than they should or making a mistake here and there. Then, in the end, they don’t really know what to do and where to go from then on.
Both are examples of people who don’t have good financial health. It’s common to believe that only people in extreme debt can fit into that category. However, a healthy relationship with money is more than just not going over budget (even though, yes, that is very important too).
Being financially healthy includes knowing how your money gets to you, how it’s invested, where it can be spent more wisely, and how to plan around it. According to the Consumer Financial Protection Bureau of the United States, four things dictate financial health:
- having control over daily and monthly finances;
- having the capacity to absorb a financial shock;
- being on track to meet your financial goals;
- having the financial freedom to make the choices that allow you to enjoy life.
The four pillars of financial well-being
The four elements presented by the CFPB were chosen through a survey taken by consumers all around the US. They divided the results into pillars regarding security and freedom of choice, in the present and the future.
Security in the present: control over finances
Knowing you’ll be able to get through the month without worrying about money is the first element listed as the key to being financially healthy. This means that you are on top of your expenses and are sure that you’ll have everything covered.
It represents a sense of security that shows that no matter what, you’ll afford to pay for your priorities. That’s why it’s so important to know what your financial priorities are: they should include bills, medical expenses, school, transportation, and everything else crucial for your living.
Security for the future: absorbing financial shock
Your bills, your rent, and all your other priorities are rightfully paid. Then, you throw your dog’s play toy right through your closed window, shattering it completely. That would be unfortunate regardless, but if your insurance doesn’t cover the damage, it’s worse than you thought.
This is all the second pillar is about: being able to afford emergencies whenever they come. That means you need to save up a certain amount — the more, the better. You never know what could happen, so having a backup for any situation is always good.
Freedom in the future: meeting goals
Being able to trace goals and make good financial planning for all of them is what the third element preaches. If you want to buy a house, for example, having all the money needed for reaching that goal in a savings account is key.
There’s no need to save and live a bad life in the present, but rather create a balance between where you are now and where you want to go. Then, keep on track with your reality and the future you desire.
Freedom in the present: enjoying life
Last but not least, financial health is all about learning how to organize your finances to enjoy your life to the max. That doesn’t mean spending money on everything you think will make you happy. Put some thought into what fits into your budget and will give you satisfaction for a period.
If you enjoy the movies, understand how much you can spend with them and plan a monthly schedule! Maybe you like visiting other countries, and your budget can allow that. There are many possibilities, but the most important part is that you enjoy yourself without creating financial problems in the future.
Learn more with OneBlinc
If you want to know more about how to have a successful financial life, keep up with OneBlinc! We have the tools and the financial advice you need to aim for a better relationship with money.
Unexpected things happen more often than we would like them to. That’s why OneBlinc is here to help, whether you have an emergency or just need that extra cash to go through the end of the month. We believe in people, and we understand that everyone might need money someday, somehow.