✔ Signs of poor financial health can include having no savings or using credit cards to get through the month
✔ Causes of poor health can be spending more than you earn, or not managing debt well
✔ Remedies include budgeting well, improving your credit score, managing debt and building savings
Have your finances taken a beating, especially after the overindulgences of the holidays or because of income lost due to the COVID-19 pandemic, and you need some first aid? This new year, set your sights on stemming the bleeding and taking steps to becoming financially healthy.
Financial Health Check Step One: Check Your Vitals
When you go to the doctor, they will ask about your medical history and take vital measurements to assess your health, such as blood pressure, heart rate and temperature. Doing a check of where you are financially is the first step to finding out what’s wrong and what steps to take in the future to remedy any problems.
Signs of Poor Financial Health Include:
- Not knowing how much money you have in your bank accounts and how much debt you have.
- Having to use credit cards to get you through the month or until the next paycheque.
- Having no or very little savings and no emergency fund.
- Having a low credit score.
If any or all of these symptoms describe your situation, like a doctor, you need to find out why it’s happening and pick the best remedy. Look at your budget and see where you might be off-track (or create a budget if you don’t have one!). Try our budget calculator to get started. Look closely at how much you make, how much you spend and on what, and how much you’re saving, as well as your debt level to get the right diagnosis.
You might need a simple Band-Aid, such as cutting out weekly dinners to limit overspending and putting that money into debt reduction. Or you might need to cure a bigger financial ailment such as high debt with a long-term repayment strategy.
Causes of Poor Financial Health Can Include:
- Spending more than you earn, which causes you to rack up debt and not be able to grow savings.
- Poor debt habits, such as paying late, missing payments, which damage your credit score.
The good news is that anyone can take steps to be financial healthy. Here are 4 remedies to get you back to financial health:
- Create a monthly budget and stick to it. It will help you make sure you have the money for things you need and are important to you.
- Improve your credit score. Your credit history and paying debts on time is very important, but so is having different types of credit and not using up all of your available credit.
- Have a debt reduction plan in place. That might include tackling the smallest debt first, or the one with the highest interest rate. It might include getting a consolidation loan.
- Set up a savings plan for short and long-term goals, as well as an emergency fund.
Just as want to stay physically and mentally fit, you want to be financially healthy too. For more tips, go to easyfinancial.com/academy.