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Just as our food and drink impact our physical health, in much of the same way, how we manage our money shapes our financial well-being. When we’re intentional about what we “feed” our financial plan, we set ourselves up for success, security, and growth. But when we neglect our financial health or practice poor money habits, we can end up on a path that makes progress more challenging than it should be.
Maintaining strong financial health means making mindful choices that fuel your future. With the right “diet” of positive habits, you can turn your financial goals into a reality.
FUELING FOR ENDURANCE
You can’t wake up one day and decide to run a marathon. (Well, you can, but we wouldn’t advise it.) You have to train and adequately fuel your body to build the endurance required to complete the race. The same goes for your financial health. By building and maintaining positive financial habits, you’ll develop the consistency, resiliency, and stability you need to reach your goals.
Financial endurance is all about maintaining your financial health over a long time. You can’t just make wise financial choices once or twice — you have to make the active decision to continue practicing them until they become habits you can sustain. Once you have these habits in place, you’ll have a better chance of sustaining your financial health in the face of unexpected challenges.
Here are a few ways you can build up your financial stamina:
Create a budget and stick to it.
A budget is essential for developing consistency and stability in your finances. It serves as a roadmap for spending and saving, helping you be more intentional about every dollar. If you don’t already have a budget, start by tracking your sources of income and regular expenses, such as housing, utilities, and groceries. Then, set realistic limits for each spending category.
As you create these spending limits, consider implementing the 50/30/20 rule, where 50% of your money goes toward needs, 30% goes toward wants, and 20% goes into savings. With this method, you ensure you prioritize your needs and goals.
As time passes and your financial situation changes, you’ll likely have to adjust your budget. While budgets are meant to be followed, they should have enough flexibility to accommodate changing income, goals, or circumstances.
Plan for the unexpected.
You’ve heard the saying, “Expect the unexpected.” As cliché as it sounds, it’s good advice for our finances. Anticipating and planning for unexpected challenges prevents disruptions that could keep you from achieving and maintaining financial stability.
An emergency fund is a great way to create that financial cushion. Try to save three to six months’ worth of living expenses. This may sound overwhelming initially, but setting aside a little each month will get you there. Once you’ve built your savings, you can rest easier knowing your plans and goals will stay on track even if you encounter challenges.
Invest in the future.
Endurance is all about going the distance; investing in your future helps you do that. Consider diversifying your investments by putting money into investment accounts like 401(k)s and IRAs, Certificate of Deposit accounts, and real estate. That way, you don’t put all your eggs in one basket, and you make it easier to increase your growth potential. No matter how you choose to invest, remember that small contributions now can lead to big rewards in the future.
BUILDING FINANCIAL MUSCLE
Financial strength is another essential element of your financial health. When you’re financially strong, you’re able to withstand economic shocks. While financial endurance creates a foundation of stability, financial strength increases your capacity to pursue larger goals.
Here are a few ways to pack on some financial muscle:
Pay off debt.
Debt can pose a threat to your financial health if left unchecked. Identify all your debts and organize them based on interest rates. From there, you can choose your approach to paying them off. You could use the snowball method, which involves paying off smaller debts and working your way up. Or you could use the avalanche method and start paying off debts with higher interest rates first.
If keeping up with multiple monthly payments for all your debts feels overwhelming, try consolidating them. A personal loan combines individual loans into one monthly payment, making it easier to manage. Depending on the interest rate, it may allow you to pay off your debt sooner, saving you thousands of dollars in interest payments.
Diversify your income.
Multiple income sources strengthen your financial security by making it easier to handle unexpected challenges. You don’t have to panic if you lose a source of income because you have other ways to bring in money each month.
Multiple streams of income can also make it easier to achieve your current financial goals and start working toward bigger ones. From paying off debt to growing your savings and investing, there are countless ways to use extra income to strengthen your finances and build a more secure financial future.
Boost your credit score.
Your credit score plays a pivotal role in your financial health. While your credit score is affected by your borrowing habits, it’s not always bad to borrow. The key is learning how to borrow responsibly. While loans are often needed for larger purchases, like homes and cars, you should never take out a loan you can’t afford. When it comes to credit cards, only use part of your available credit — we recommend no more than 30% — and make your monthly payments on time and in full.
Ultimately, your credit score determines your creditworthiness. By borrowing responsibly, you can raise your score and demonstrate that you can be trusted to pay back your loans. The better your score, the more likely lenders are to offer you better interest rates and loan terms, which can help improve your financial health.
ARE YOU FUELED BY POSITIVE OR NEGATIVE FINANCIAL HABITS?
As you’ve been reading, have you thought of any financial habits you already practice? Or maybe you realized that your financial health could benefit from forming a few more positive habits. Either way, we encourage you to reflect on your financial habits to see if you’re giving yourself the fuel you need to be financially strong.
Good habits like budgeting, putting money into savings, and working to pay off debts help positively fuel your financial health and growth. Conversely, negative habits like impulse purchases, overspending, and ignoring your credit health can damage your financial well-being.
If you’re fueling your finances with negative habits, how do you switch to more positive ones? Start by identifying some common triggers for your negative habits. Do you make more impulse purchases when shopping without a predetermined list? Do you go on shopping sprees when you’re stressed? No matter what your triggers are, it’s crucial to find ways to counteract them. If you’re going to the grocery store, make a list. Feeling stressed? Find some hobbies that don’t involve spending money.
Implementing positive financial habits may feel challenging at first, but remember that every step — no matter how big or small — moves you closer to financial health. Just like nutritious foods fuel our bodies with the strength they need to perform well, our positive financial habits create a foundation for growth and can result in significant gains and long-term success.
