There's no denying that having a health bank balance can be important for your financial well-being. Seeing that number go up does offer some real security and flexibility. However, if you're not considering the other markers of financial health in your life, then your situation could very likely use some improvement. Here, we're going to look at how you can ensure you get a whole picture of your financial health.
Your Net Worth Tells a Bigger Story
For one, there's more to your current financial situation than your bank balance alone. Instead of looking at your bank balance, take the time to work out your net worth, including savings, investments, property, and debts. Someone with a modest income but no debt and a growing retirement fund could be in better shape than someone earning a lot more but also with a lot more debt.
Debt Can Cancel Out Everything
No matter how much you are earning and how much you have in your bank, if you're not managing your debt well, you can lose it all. Avoid high-interest debt like credit cards and payday loans, and ensure that you're proactively paying off what you owe above the minimum. If you find your debt quickly growing over your earnings, debt relief strategies like those shown by Alex Kleyner can help a lot. Your bank balance might say you're comfortable, but if your debt is growing faster than your savings, it's a red flag.
Savings and Investments Are Your Tools for the Future
Your bank balance is a good look at your current holdings, but true financial health is about building for the future. This means improving your long-term savings, putting together an emergency fund, contributing to your retirement, and working towards a strong investment portfolio. Your bank balance might say you're good right now, but it's important to ensure that you're good in the future, too.
Your Credit Score Can Open Doors
If you don't have a good credit score, then even having a healthy bank balance might not help when, for instance, you're looking for a mortgage or seeking funding to build your own business. Your credit score affects your ability to get approved for loans, rent housing, or qualify for low-interest rates. If you have no credit history or a bad credit history due to poor debt management and overuse of running credit agreements, you can lack the tools to build lasting financial strength.
Financial Habits Are the Foundation
There is no one number or even a series of numbers that can help you build financial health. It's about your habits, instead. Strong money habits, like budgeting, saving, and staying out of debt, are much more likely to leave you in a better long-term position than a cash windfall of any amount. Work on those habits first and foremost.
The tips above should demonstrate that there's a lot more to the picture of your financial health than your bank balance alone. Get in control of every aspect of your finances so that you can live with the flexibility and security you deserve.
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