Greater Information Leads To Superior Financial Health

Greater Information Leads To Superior Financial Health

Financial health is a depiction of the state of a company’s or person’s finances. A person with good financial health normally handles their finances well, makes payments on time, and manages their money well. On the other hand, a person in poor financial health normally is not making their payments on time and owes a lot of money.

In the past few years, the average savings rate among Americans has declined sharply. Worse still, borrowing to fuel consumption is an increasingly common habit. Many Americans are spending more than they earn, which is a recipe for financial disaster. There are several things you can do to restore financial health.  

Reduce your expenses

Building wealth is like attempting to fill a container with water; you cannot fill it up if the container is full of holes. The first priority is to plug up the holes or make them smaller. The main objective is to earn more than you spend or spend less than you earn. This will enable you to accumulate savings which you can use to pay off your debts and invest in the future. There are several online tools which can help you track expenses.

Pay off your debt

The money left over after reducing your expenses should be used to pay off debt. A good place to begin is paying off debt with the highest interest rates first.

Establish an emergency fund

Once debt has been eliminated, you should at once establish an emergency fund. There are different opinions of how large the emergency fund should be. For a start, you can save enough to cover three months of expenses.

Increase your income potential

This includes enhancing your skills to secure a promotion or a better job, taking a second job, and finding alternative ways of supplementing your primary income.   

Save for short-term goals

Instead of borrowing money to buy what you want, you should consider saving for them. Certificate of deposits and online savings accounts are some of the best ways to preserve your capital and grow your money to meet short-term goals. These goals include saving for your college education, your first home and business start-up fund.

Invest for long-term goals

Money intended for long-term goals such as college saving for your children’s college education or saving for your retirement, should be invested. A good strategy would be to invest in a diversified portfolio made up of low cost passively managed funds. The investment should reflect your investment time horizon and your risk tolerance level.  

Get proper insurance coverage

Having proper home, life, auto, disability or health insurance coverage can help protect the assets which you have accumulated over the years. There are a wide variety of options available with different premium expenses and coverage details.

Feeling good about financial health is as vital as maintaining proper physical health. Saving and investing, keeping debt and credit levels manageable, keeping cash flows positive, and safeguarding financial assets are crucial for fiscal fitness.   

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Abacus Financial (Los Angeles, CA) is the national expert in workouts of distressed commercial real estate borrowers and operating companies. Abacus is a national investment firm dominant in the specialized discipline of Value-Added Acquisitions.