You may believe that your financial health is easy to understand in the context of personal finance. But assessing the health of your money is not simple. Your overall financial health is comprised of many elements, from learning how to live within a budget, to building good credit, controlling debt and excess spending, developing short and long-term financial goals, and learning to invest.
Early financial planning and assessment is a key principle to success just like going to the family doctor for an annual visit is important for maintaining excellent physical health. Regularly assessing your financial health is a wise step that can help to prevent financial “illness” down the road. Making a commitment and improving your financial health is relatively easy with the right guidance. But first you must first know your diagnosis. What is the condition of your money.
The first indication of good financial health is that revenues and income are in balance with liabilities and expenses. Though you want to tip the scale in favor of having more cash on hand from revenues and income. How do you grow more cash on hand? It’s rather simple really. Just spend less than you earn, which is the #1 principle and indicator of excellent financial health.
As simple as “spend less than you make” sound, most people do just the opposite. Why? I suggest due to poor cash flow management, lack of cash flow management training, lack of conscious effort to efficiently manage cash flow or a combination of all. Poor cash flow management is the #1 indicator of ill health financially.
Poor cash flow management is amongst the most common causes of debt; with individuals either consciously spending money with the full knowledge that they are in debt or spend money when not realizing that they were in debt. Whether it’s making purchases they really can’t afford or borrowing loans they can’t repay, poor money management is an epidemic throughout the United States. With financial institutions toppling all around us, the woes of poor money management is more in the face of this generation than ever before.
The journey to financial health is just that, a journey. The biggest threat to your financial health is not a recession; it’s your brain. It’s all about the choices you make. If your money’s health is in good shape, congratulations. But what is “good shape” to you? Being comfortable where you are? Then maybe I should reword the statement. I will say, if you are comfortable with your money’s health, congratulations. If you are uncomfortable, take action!