Financial Health: 5 Issues to Check

It’s one thing to go to a medical doctor if you’re not feeling well, but how about when you’re not feeling well about your financial health? The obvious answer is to find a personal finance advisor and ask for a checkup!

While I’m just a gossip about personal finances, that fact frees me up to talk about personal finances without talking about anybody particular. So, let’s take a look at some issues. In other words, let’s dish the dirt:

Why is Financial Health Important?

Experts believe financial health, a little-understood concept in overall health, offers insight into economic hardship, a determiner in mental health and overall health outcomes.

Check your budget. It’s essential to know where you’re at with your financial health to understand your overall mental and physical health, the experts suggest. Financial health can determine crazy stuff like housing instability, having less food to eat, and the sorry state of making trade-offs in your actual life that affect your health.

The solutions to problems with your financial health, these experts say, are to increase your ability to make money, develop skills to increase your wealth, examine your attitude toward money, increase financial literacy, and put aside reserve funds to weather economic bumps.

AVOID THE BANDAIDS

While society provides food shelves, temporary shelter, and job programs, on the whole, society doesn’t address your financial health like they do your physical health. Most of what society does is only a band-aid, and people’s financial health is rarely addressed.

So, to really head off disasters, you must confront yourself. That’s why financial health should be important to you. The buck stops with you.

The 5 Financial Health Issues to Get Checked

Assuming you actually want to share your financial woes with somebody, regardless of the severe house, where would you go? On the surface, your financial health is more straightforward to examine than your physical health. There are just fewer systems.

Here are the financial health issues you need to look at:

• Your budget
• Your goals
• Your debt
• Your credit score
• Your reserve funds

Your Budget

Your budget is just an estimate of the income and expenses you’ll be looking at for some time in the future, usually a month or a year. Since the end of 2023 is new, many people look at their annual budget.

For example, in the next seven years, the USA is supposed to switch to EV cars at a pace of about one out of every vehicle on the road. Have you considered working into your budget to buy an electric vehicle?

Has your housing situation changed? Consider how much you’re paying in rent. Would you be better off sharing space with someone communally to save a little money? Is it time to leave your big old suburban home now that the kids are gone?

Your Financial Goals

Financial goals change over a lifespan. At one time, you saved up for a downpayment on a house. Now you’re really focused on putting away for retirement. Your employment picture changes, too. For example, you may believe that it’s time to go into business for yourself.

Experts say you have to save up X times your income with every decade you live. So, with every turn of a decade, the demands on you to save money increase. When you’re in your twenties, you’re not expected to save much of anything, but by the time you turn forty? It’s three times your income!

With those demands, it’s no wonder most Americans are financially unhealthy. Depending on your age, reaching your financial goals involves:

• Taking scissors and snipping up your credit cards.
• Refinancing your mortgage.
• Moving a good chunk of money into the stock market.

Your Debt Picture

You can carry significant debt when you’re in your thirties and forties, but after that, your debt picture needs to slim down like an abstract mannequin. Nobody wants to loan you money in your twenties, but if they do, you have complicated your financial health just that much more.

Twenty-year-olds may carry about $10,000 in debt, but people in their fifties may have a debt of as much as $150,000. Whew! One reason to check your financial health every year is to reach the age of 45 years debt-free because it often translates into an early retirement.

So, when somebody retire to the golf course by age 55, they’ve probably handled their debt well. It might help to ask a financial advisor how to reduce your debt as you approach retirement so things go smoothly in your last years. FYI, the average debt in America is over $100,000! Staggering!

Your Credit Score

It’s unfortunate, but society believes your credit score is a good barometer of your insurability. With good credit, you pay so much less for auto, home, and life insurance, even though the only studies that tie your credit score to your ability to drive a car are paid for by insurance companies.

Good credit should only be applied to your ability to take out loans, and as such, good credit serves you well in that area. A good credit score is a real asset if you must borrow to get ahead. A lifetime of good credit to lending institutions is gold, or so they say, enabling you to buy homes, new cars, and businesses. It even helps your investment strategy. Consider vowing to keep your credit score high for an excellent lifetime goal.

Employers make hiring decisions based on credit scores, even though little evidence exists that lousy credit affects on-the-job performance. Half the employers in America run a credit check on new prospects. And ten percent of Americans are denied employment because of a poor credit score, a New Age superstition. It would help if you kept an eye on your credit score. America’s too simple-minded not to.

Your Retirement Funds

It’s not just retirement funds that people create accounts for in their personal life. There are also rainy-day funds, educational accounts, cash reserves, and brokerage accounts. These accounts amount to saving up for future use. 

Retirement doesn’t look inexpensive to most of us who aren’t in it. If you want a clear picture, you must check with a financial advisor about this complicated subject. Suffice it to say the more money you have, the more complex your retirement picture gets. 

Retirement involves tax-deferred accounts, 401K accounts, brokerage accounts, and pensions, not to mention checking accounts and savings accounts. By the time you get into retirement, you will probably have an estate executor that you can work with, and it’s easier because they’re a family member, but if you’re younger, check with your financial advisor to ascertain how healthy your accounts are at the point you’re in. 

* * * * * * * * * * *

My regular email newsletter is a great way to build relationships with my readers and share the blog posts and other content I’ve worked on. If you are interested, sign up below: