What Financial Health Means to Me, because your financial health matters.
We never stop hearing the importance of physical health, emotional health and psychological health. But it so happens that taking care of your financial health is a critical component in all three.
The whole notion of health -- whether with oneself or in a relationship -- is one of consequences, for good or for ill. Eat well and exercise and chances are you'll live happier and longer. Indulge in destructive behavior and the opposite is true.
With finances, it works the same way. Make smart, strategic moves today and, consequently, you'll live better and with less stress. Or make dumb financial moves, max out a pile of credit cards and blow through every last dime you've got now and you're guaranteed to suffer later. (Wake up call: Does a flashy new car every year look as good if it means being homeless as a 90-year old?) As a Certified Financial Planner, it is my job enable the former and to help my clients avoid the latter.
For myself and for my clients, I count three main tenets of financial health:
1) Pay yourself first: Once the bills are paid, this means socking away a set amount of money first -- and regularly -- without even thinking of spending it. You probably won't even notice the money is gone but you will notice how it adds up. If you never keep anything you will never be healthy financially, or come close to being financially independent. What counts is not how much you make but how much you keep.
2) Plan and save for long-term goals: Whether it's buying a house or taking a dream vacation, it's more likely to happen if you make a plan and stick to it. I know tons of people who have huge "travel" budgets but who never really get to take a big glamorous trip because the waste all their cash on dinky little weekends away that they often don't even enjoy. If it's worth wanting, it's worth planning for.
3) Have an emergency fund: With somewhere around half of Americans not knowing how they would cover a $400 emergency, this basic step may take some work. Set some smaller goals first, like $400 saved, work up to saving a month's salary and then onto the more typical 3 to 6 month depending on your job security and family responsibilities. What's a good figure? Six months salary plus the amount of your health insurance deductible in the bank will keep you sitting safe and sound. It sounds like a lot but look at it as a work in progress. If you're financially prepared for an emergency, it becomes less of an emergency.
Financial health may even improve your plain ol' health for a couple of reasons. First, you'll be able to afford the good things to keep you in good shape. And, most importantly, financial health will mean you won't be plagued by worst kinds of soul-destroying stress.
Until next time, remember your money matters, and so does you financial health too #finhealthmatters.
DAVID RAE, CFP®, AIF® is a Los Angeles-based Wealth Manager with Trilogy Financial Services, a regular contributor to the Advocate Magazine, author of Financial Planner LA and a financial adviser proudly serving friends of the LGBT community for over a decade. Follow him on Facebook or via his website, www.davidraefp.com.
Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser. Additional advisory services offered through Trilogy Capital, a Registered Investment Adviser. Trilogy Capital, Trilogy Financial and NPC are separate and unrelated companies.