Do you feel stressed about money and fearful to even talk about finances? You’re not alone.
A June 2019 financial taboos survey from TD Ameritrade shows that Americans consider the topic of finances to be more taboo than religion, politics, and health issues.
The same survey also shows that only two-thirds of Americans feel comfortable discussing their income with their spouses and half of Americans (and seven in 10 Millennials) think society would be healthier if people could more openly talk about personal finances.
Mental health and physical health are recognized as essential parts of overall wellness, but financial health is an equally crucial component of mindful self-care.
That’s why we’re sharing information to help with your financial health, starting with this post!
So, just what does “financial health” mean?
In a nutshell, “financial health” is the term for the funds or resources necessary to meet your immediate life needs, plus those set aside to cover a range of unforeseeable costs.
The Financial Health Institute further defines financial health as “the dynamic relationship of one’s financial and economic resources as they are applied to or impact the state of physical, mental and social well-being.”
The basics
Credit, debt, savings, retirement, and insurance are the key factors of financial health. Get a handle on these and you’ll be on the way to a lifetime of financial security.
- Order a CREDIT report, which lists your current debt, including all lines of credit you’ve opened and how you manage them, and your credit score. Everybody’s heard of “good” and “bad” credit: a healthy credit history demonstrates that you make payments on time, and allows you to get loans at the best interest rates for purchases such as a car or home.
- Pay down DEBT, especially high-interest debt. Making on-time payments can improve your credit score – a huge benefit. Calculate your debt-to-income ratio (DTI), which refers to how much of your monthly gross (pre-tax) income goes toward paying your debts. Most lenders like to see DTIs of 36% or lower.
- Bolster your SAVINGS. Begin by establishing an emergency fund, ideally enough to cover your known expenses (groceries, lodging, transportation, bills) for a minimum of three months. Then focus on setting aside money for long-term goals, such as buying a home, having children, or retirement.
- Speaking of which, it’s never too early to think about RETIREMENT. When you’re barely scraping by, it seems impossible and far, far away, but a good financial advisor can help you find ways to start saving, and work toward setting aside at least 10-15% of your pre-tax income to help you live your best later life.
- INSURANCE is a crucial element of financial health. If you’re in your 20s or 30s, it’s tempting to skimp on medical insurance (“I’m young and healthy!”), auto insurance (“I’m a good driver!”), or renter’s insurance (“I own nothing of value!”), but an emergency can quickly ruin your financial health. Make sure you (and loved ones) are fully covered.
Taking charge of your financial health does more than make you feel better right now. It can also improve your outlook for financial stability years and decades into the future.
You’ve got this.
Read next: Intro to Financial Checkups
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