What is Financial Health?
There are 4 pillars of health: physical health, mental health, financial health, spiritual health.
It’s important to keep in mind that each pillar impacts the others. For example, if you are unhealthy physically, it can also deplete how you feel emotionally, your finances, and your faith or connection to your spirituality (however you define this). If you’re finances are unhealthy, it can cause mental and emotional stress, which can trigger physical ailments, and drain your sense of purpose. So on and so forth.
For the purpose of this article, we will zoom our focus in on financial health.
When you are financially healthy, you have enough money to pay your base level of living expenses, now and in retirement. You also have enough to cover anything unexpected that might come up (e.g. accidents, illnesses, injuries, casualties, etc). You know how much money you have, where it is, and where it’s going. You are in control of your money, your money is not in control of you.
You can improve your financial health by having two sets of strategies.
A defensive strategy and an offensive strategy.
Let’s look at these two categories in more detail:
DEFENCE - Protection: Being prepared for what could happen
Budgeting is about you being in control of your money, instead of it controlling you (not about restricting yourself from spending). Create a monthly or weekly budget and stick to it. Make sure your budget in amounts to support the other areas of your health as well as you base of expenses. For example have a weekly budget set aside for self-care and having fun!
There are short term and long term savings. Your short-term savings is your defence; long-term savings is your offence.
Short term savings is what your bank savings account is for. You can have 2 different types of short term savings.
Emergency fund: This should be an amount that can cover 3-6 months of your expenses (i.e. the total amount of your monthly budget x 3-6 months)
Saving for a purposeful spending: This is for when you want to save up for things like travel, a house, or a car, etc. This is money you save up in order to spend strategically, sometime in the near future.
Consult with a qualified financial planner to discuss the options that are best suited for your context. Key types of insurance you should have are life, income protection, health, car, home, long-term care, and for entrepreneurs: business insurance. If you don’t have adequate insurance to cover an emergency, you are likely going to take from your retirement fund, go into debt, or beg... Make sure you are properly protected, to avoid these kinds of situations!
OFFENCE - Is about growing your money. These are your long term savings, and are not kept at your bank.
Retirement: Your retirement should cover all of your living expenses plus leisure (fun money) that you will need after you retire. The exact amount you should have is based on several individual factors and something you should talk through with a financial planner. You should consider things like your personal lifestyle (or the lifestyle you would like to have in retirement), your health, and bills.
Future health / long-term care: This is to cover any needs you may come into for paying for a retirement home, home nurse care, health care services. The truth is that the majority of people need it, but very few ppl have it. Get ahead of the curve and plan properly.
Investment accounts: These are accounts that will build your money, and not in a bank. There are so many options for growing your money. Here are a few examples you have available to you (not limited to this list): Stocks, Real estate, Businesses, Annuities (fixed monthly income guaranteed for life).
So there you have it! These are core aspects you need to have in place to achieve financial health. What I have provided for you here are the bare-bones basics. Each of these topics are nuanced and layered, and can vary a lot from person to person. So I highly recommend that you consult with a financial planner when making these important decisions to create a good strategy for yourself!
I provide FREE consultations for all nurses, NPs, and PAs. Please reach out if you would like to book a meeting with me. I would be happy to be of service to you!
In our next article we will be looking at DEBT, (and in particular student debt). It is neither offence or defence. It shouldn’t exist but sometimes does.
We will discuss this in an upcoming blog as it needs its own space to be unpacked. So stay tuned for our next article!