Becoming financially healthy is not as impossible as it may seem

Beacon Financial Education aims to help expats organise their personal finances and educate them on retirement plans, personal lifestyle planning and wealth management. Robert Rigby Hall from Beacon gives us 5 convenient tips on how to become financially healthy. 

Today, every store, hotel, and airline you turn to seems to offer you a credit card. Monthly subscriptions pile up. Expenses, bills, and other payments seem to be never ending. All of these factors make it difficult to keep your finances in order. But don’t stress, financial health isn’t as impossible as it seems. This article will show you why.

What is financial health?

Financial health is having your finances in order with a strategy to reach your life planning goals. Your financial well-being is entirely dependent on what your financial goals are. Let’s say your goals are to purchase a home by the age of 40, pay for your children’s college education, and retire by the age of 65. If you are on track to reach these milestones, you could consider yourself financially healthy. But why does it matter that you are financially fit?

What does being financially healthy mean for you?

What does it mean to be financially healthy? What will it feel like? Being financially healthy means feeling secure. It means you and your family are protected should something happen, like an unexpected death or a job loss. Knowing your family is secure will bring a sense of comfort. Many people reading this article will ask themselves: "Well, how can I become financially fit?" Not to worry, this article provides a 5-step guide on how to become financially healthy. Financial health is only a few steps away!

5 tips to become financially healthy

Here are 5 tips on how to become financially healthy:

1. Know where you stand

The first step is knowing where your finances stand. Keep up to date with your finances by tracking the worth of your accounts like an accountant. Some people like to map out their assets and liabilities - using an Excel Spreadsheet or accounting software - so they will know exactly where they stand. A potential first step towards becoming financially healthy.

2. Take care of your debts

Now that you have a list of all of your accounts, take care of any debts that you may have, such as an old loan from a friend, a credit card, or more importantly a collections account. If you are unable to pay off these debts at the moment, make a realistic plan for how you will do so and then communicate this plan to your debtors. This is the goal you will be working towards. Paying your debts not only helps improve your credit score, it also cuts down on brutal interest expenses. Becoming financially current will give you peace of mind, allowing you to move forward with your finances confidently.

3. Get positive

Since you now know where you stand and you have a plan to take care of your debts, it’s time to get cash flow positive, or in this case, bank account positive. Getting bank account positive means taking in more money than you spend. This may seem fairly intuitive, but most people do not do this! There are two ways to become bank account positive. One way to do it is to increase your earnings. Evaluate your worth at work. Are you being paid enough? What is the going rate for your skills?

If you are being underpaid, even just a little, it is worth pursuing it - perhaps through a raise or working for another company. The other way is to decrease your expenses. It is often easier to decrease your expenses than to increase your income. Similarly to step 1, map out your expenses. Locate areas you can cut costs and then stick to your plan!

4. Pay yourself

Now that you are bringing in more than you are spending each month, you can develop a savings plan. Aim to save 5 - 10 percent of your monthly paycheque. You can deposit these savings before you pay bills or have the amount taken directly from your paycheque and deposited into your savings account automatically. Start now! You will thank yourself down the line.

5. Invest

You’ve organised your finances, taken care of debts, become cash-flow positive, and begun saving. The next step is to get a financial advisor. Your financial advisor will find the best investment strategies for your goals. They will also assist you with fine-tuning savings strategies, formulating retirement plans, and navigating complicated tax policies. Aside from all these wonderful benefits, a financial advisor will help monitor your finances - giving you peace of mind whilst saving you time.

Becoming financially healthy isn’t as impossible as you’d think. This 5-step guide could help you get on the right track!

Beacon Financial Education provides access to a global network of advisors. Whether you are a U.S. citizen or international from another country residing in the Netherlands, or a Dutch national moving to another country, Beacon can help you with finding your way in your new country.

Beacon Financial Education does not provide financial, tax or legal advice. None of this information should be considered financial, tax or legal advice. You should consult your financial, tax or legal advisors for information concerning your own specific tax/legal situation.