Everyone’s always going on about how you should aim to achieve ‘financial health’. But what does that mean? It’s pretty simple: Just as physical health relates to the state of your body, financial health relates to the state of your financial affairs. When your finances are healthy, you can pay your bills on time, save for future goals and handle unexpected expenses without breaking a sweat. Here are six steps to get you started.
Step 1: Create a budget – and stick to it!Budgeting is a crucial step to achieving financial health. Start by tracking your income and expenses. 22seven makes this super easy. Just link all your accounts and you’ll quickly get a birds-eye view of your spending. With a budget, you can cut unnecessary costs and allocate funds more effectively. Be realistic and honest with yourself. And remember: a budget is a life tool, it’s not set in stone. You can review it any time as your lifestyle and your goals change.
Step 2: Build an emergency fundLife has a way of throwing curveballs, from car repairs to medical emergencies. Having an emergency fund can be a lifesaver. Aim to save at least three to six months' worth of living expenses. This sounds daunting, but start small. Saving a little bit each month will quickly add up over time.
Step 3: Manage your debtDebt can be a major drain on your financial health. Here are three ways to take control.First, prioritise high-interest debt: Focus on paying off ‘expensive’ debt like your credit card and any small loans. The faster you pay these off, the less interest you’ll accrue.Second, consolidate if necessary: If you have multiple debts, speak to your bank about consolidating them into one loan with a lower interest rate. This can simplify your payments and save you money in the long run.And lastly, avoid taking on more debt: It’s so tempting to live on credit, we know! But it’s not worth it. Stay away from any new debt until you’ve paid off all your existing loans.
Step 4: Save for the futureIf you start now, you can achieve long-term goals like buying a home, educating your kids and saving for retirement. On the latter point, make sure you’re contributing to a retirement fund. Yes, from today! If your employer offers a pension plan, take full advantage of it. If not, speak to a financial advisor about setting up a retirement annuity (RA). A certified advisor can also help you make other smart investment choices to grow your money over time.
Step 5: Get insuranceIt’s such a grudge purchase, but insurance is a crucial part of financial health. Whether it’s health insurance (medical aid), car insurance or home insurance, having the right coverage can protect you from significant financial setbacks.
Step 6: Talk about it!In many cultures, talking about money remains taboo. It shouldn’t be! Discussing financial matters openly with your partner, your family or your friends is a healthy part of the journey. Share tips, seek advice and support each other.
At the end of the day, becoming a money maestro is a marathon, not a sprint. It takes time, patience and discipline, but the rewards are well worth it. It’s never too late, so back yourself and start the journey towards financial health.
