How to be more financially healthy starts with tracking your net worth. If you don’t measure your net worth and financial health at any given point in time, you can’t improve it. It’s more important than ever to know what your expenses, debt, income, and asset are.
It’s fun to know you’re moving up in life and building wealth. Financial health is affects so many people’s lives that we can’t afford to not know our financial health at any given point in time. Money affects relationships and overall quality of life.
When I was not financially healthy, I felt insecure. I had no other choice but to give value to my employer because if they cut off my income, I wouldn’t have anywhere else to turn. After building wealth for the past seven years, I’m at a good financial position.
I am currently very financially healthy with a net worth upwards of $450k just at 28 years old. I can only imagine just how much further it’ll grow into. The more time passes, the more advantageous it is for me because I invest capital into quality assets.
When you take intentional steps to improve your financial health, results show. Too many people don’t put in the effort but expect the results to show up right away. That’s not how any of this works. The first step is to put in the dues.
The money follows after that. Hard work pays off. It took me seven years before I felt comfortable with money.
Financially Healthy: 9 Ways to Improve it
Below are the 9 ways to be more financially healthy. It’s more than possible for the vast majority of people. Yet so few do it. It’s high time people start adding $100k to their net worth.
1) Know Your Financial Position
Financial position is knowing key numbers. How much cash do you have on hand? How much debt do you have? Are you in the market for a new car? Will you finance it or pay cash for it? These are important questions that matter the most.
I personally track my net worth frequently and know which numbers I need to focus on on a daily basis. It’s too important for me to not track my financial numbers. In January 2023, I spent the majority of my time cutting down debt. I had $15k worth of 0% debt to pay off.
Even though I paid it off, it was a stressful time coming up with the money to pay off the large balance. After I paid off the debt, I knew I was financially healthy and could be even more financially healthy without the debt hanging on over my head.
Your financial position is what gives you standing in the world. It’s important to track your net worth.
2) Following Through with a Budget to be Financially Healthy
A budget is a CRUCIAL tracking tool. My spending went through the roof in 2022. Because we were coming off a historically all time high stock market and I thought the good times were going to last forever! That was far from the truth. Ironically, that was the year I stopped budgeting.
After 6 years of meticulously tracking my spending, I thought I no longer needed a budget. I wanted to live it up. After the Fed crushed the markets, I knew better. 2023 was when I started being more diligent with my spending and started budgeting again.
It not only helped me skyrocket my net worth, pay off my debt, and live a less stressful life, I feel a renewed interest in my finances again. It sparked that interest again. At the very least, there are 3 reasons to save money and why budgeting is so crucial.
Budgets saved so many lives and it will continue to save many more.
3) Always Saving Money No Matter the Income
Another reason why I didn’t save as much money as I would’ve liked in 2022 was because my income was the highest it’s ever been. For a 27 year old to be making $200k, that was an insane amount of money! Even after taxes!
Therefore, I thought my general frugal habits plus my high income was going to put me over whatever situation. I was so wrong. Stocks can decline more than expected. Even if you have a high income, it’s not the time to live it up. Lifestyle creep is a real thing many ignore.
In 2023, I went back to the basics and my roots and started saving much more money than I ever had before. I also mindfully spent my money that improved the quality of my life and health. I have no need for trinkets and toys that give a one time benefit.
The more intentional you are about your spending and subsequently saving money, the more you are financially healthy.
4) Using Credit Cards Responsibly
Dave Ramsey is absolutely against having credit cards. He thinks that using credit cards to spend money on things you were going to spend money on anyway doesn’t exist. He thinks that because the credit card companies spent billions on researching human psychology, that you can’t beat them.
That’s wrong. Credit cards not only build credit but they give you rewards as well. I make around $1k – $5k every year by using the right credit cards for my spending. Not a lot of money but still enough to fund a month’s worth of rent.
Responsibly using credit cards are crucial to improving your financial health. When you join the 800 credit score club, you feel the sense of accomplishment. The subsequent loans are easier to get after and the terms get better for you, as well.
Lenders offer you better rates. The rich uses debt to increase their net worth. Therefore, it doesn’t hurt to have a good credit score.
5) Investing, Not Gambling Your Money
At the start of 2023, it’s as if investors didn’t learn their lesson from the bear market of 2022! Bed Bath and Beyond stock went through the roof in the first two weeks out of the year. 50% returns in a single day! That’s not investing, that’s gambling.
When you invest your money, it boosts your income. One day, your investment income surpasses your active income. That’s the day good things happen. The way to stay financially healthy is to invest your money in quality assets like stocks and real estate.
There’s nothing wrong with putting your money in a broad market based index fund that returns 7 – 10% per year, on average. It’s actually the biggest differentiator you can have. Investing gave me an extra $25 – $45k per year, on average, which covered my essential expenses budget.
In 2023, I put $450k into money market accounts that earn 4%, which earned me $1.5k/mo. That paid for all of my expenses and showed me the power of financial independence.
Investing is the way to be financially healthy.
6) Read Blogs and Watch YouTube Videos
When you become obsessed with personal finance and consume knowledge like no other, you start practicing good money habits. The way to be financially healthy is to read and watch personal finance videos from people who’ve done it. That’s how I got my start.
That’s how I knew how important it was to save money, especially in the younger years because the dollars are worth so much more. Dealing with inflation is no fun for anybody. Investing your money gets you to freedom.
The financial advice is written and produced by actual millionaires themselves. It’s what worked for them, which has a high chance of working for you. Especially if their route is similar to the route you want to take. There’s an endless supply of free and quality information out there.
it’s time we take advantage of free information and not just use the internet to surf for cat videos.
7) Always Keep an Eye Out to Increase Income
This isn’t maximizing income. That’s a bad task. One of my friends was making $300k at 27 years old. He left the firm after 7 months because the work was just too much. Some companies definitely overload you with work to the point where you can’t take it.
Maximizing 9-5 income is not the way to go because companies expect a ton in return for high pay. However, it does mean looking for additional income generating opportunities such as starting side hustles and/or getting promotions at your company.
You have to play your hand very well.
You can’t ask for promotions and raises if the company isn’t making any money. However, you can switch jobs to another profitable company and make more money. There’s always a need to keep a lookout to increase your income.
Becoming financially healthy requires you to increase income. Saving money is great but the real wealth is built with income.
There’s nothing wrong with making an additional $10k every year. It adds up.
8) Pay Down Debt to be Financially Healthy
The record low interest rates encouraged millions to take on cheap debt to finance their lifestyle. Some even used leverage to finance their business and stock investments and learned a lesson in the 2022 stock market crash!
To be financially healthy, it’s a good idea to pay down your debt. I took on $15k of 0% debt in 2021. Even though it was 0%, I still felt like I was beholden and chained to someone else. It didn’t fit into what I wanted to do and what my goals were.
Therefore, the last payment I made in February 2023 felt sweet. After paying down your debt, every payment you receive after is yours. No one else has a claim to it. Only you do. That feels amazing, more than anyone gives it credit for.
There’s a reason why many millionaires are against people having debt, aside from real estate. It just doesn’t do any good in the long run.
9) Financially Healthy? Create Multiple Sources of Income
$100k from multiple sources of income is much safer than $100k from one 9-5. Income diversification is why people are broke. Too many are dependent on their employer to fund their lifestyle. News flash! Employers are not immune to macroeconomic factors.
Even good employers who takes care of their employees can’t take care of them if the money doesn’t flow in. Google started 2023 by laying off 12k employees. Companies know income diversification is so important which is why they diversify their revenue base.
Multiple sources of income boosts financial health.
Not only can additional sources of income raise your overall income, it’s an embedded security feature as well. Companies hire multiple employees for a reason. When one employee leaves, they just make the remaining employees pick up the slack, like nothing.
Multiple sources of income makes sure you are financially healthy.
Financial Health Should Always be Improved
Too many go about life without really thinking about the financial health. Then when the inevitable layoff happens, they are more nervous than ever before. To be financially heathy, you have to think about your decisions consistently and possibly even constantly.
When I lost my sight on trying to be financially healthy is when I became financially sick. Bad things happen in unexpected ways. And I’m someone who is more financially prudent than the majority of Americans! You never know when it hits you because it happens out of nowhere.
The first step is to track your financial health in the first place. Many people don’t know how to measure their net worth, which is why they’re in trouble. When you’re first starting out, you have no choice but to obsess over every number like how much cash on hand you have.
I went through the process myself, and I confirm that it is a drag. When I could finally break away from the mindset of focusing on the details and to focus on the bigger picture is when I felt better. It’s when I felt I made it because the bigger picture is much more fun to focus on than the details.
Many people can be financially healthy but so few people are. Even in the wealthiest and richest country in the entire world like the United States. There are people pulling in $300k/year who are broke. They have no excuse to be broke but somehow they found a way to be broke.
It’s not going to be you, as long as you put in the work and effort.
Financially Healthy: 9 Ways to Improve it Shortlist
- Know your financial position
- Following through with a budget to be financially healthy
- Always saving money no matter the income
- Using credit cards responsibly
- Investing, not gambling your money
- Read blogs and watch YouTube videos
- Always keeping an eye out to increase income
- Pay down debt to be financially healthy
- Financially healthy? Create multiple sources of income
