Financial health is considered one of the most important things in life. It refers to the state of individual’s personal monetary affairs. When it comes to financial healthy, it has various dimensions from how much savings you have to how much income you are spending on a fixed or non-discretionary expenses.
Financial health of every individual is different
Keep in mind that what you are trying to achieve id your own financial health. Therefore, make sure to design plans that meet your own goals. Each person’s situation is different so developing your own financial plan does matter. It is to ensure that you are on track to reach your goals. When implementing your plan on achieving financial health, always keep in mind that there will always be financial risks that can occur unexpectedly.
How to measure your financial health?
It is important to get a better grasp of your own financial health by asking yourself several key questions. Such as:
- Are you prepared enough for the unexpected?
- Do you have an emergency fund?
- Do you know how much your net worth is? Is it positive or negative?
- Do you have the things you want or need in life?
- What percent of your debt (such as credit cards) would you consider high interest?
- Have you started on saving for retirement?
- Are you on track to meet your long-term goals?
- Do you have any insurance to cover your health and life?
These questions are useful for you to be used as self-assessment on your personal financial health. However, you can also use them to assess your business’s financial health as well.
How to determine financial health
There are number ways you can determine your financial health. What represent monetary resources include savings and overall net worth. However, these aspects can be affected by debts such as credit cards, student loans, auto loans, mortgage, etc. Also, keep in mind that your financial health might change from time to time depending on the your liquidity, assets, and the fluctuation of the prices of services and goods.
Let’s say you have constant salary. However, the costs for foods, mortgages, gasoline, and business funds increase at the same time. It may put you in difficult situation where you lose ground even you cannot keep pace with the rising cost of goods and services.
The signs of healthy financial health can be detected from the steady flow of your income, rare changes in expenses, strong ROI (return of Investment), and a cash balance that keeps growing and continue on track.
Business financial health
Attempting to achieve business’s financial health is basically the same as how you do it to your personal one. There are various factors to consider when trying to improve your business’s financial health including the revenue and the spending. What you need to focus on is long-term financial health and survivability. Also, make informed financial decisions to minimize financial risks. You will make better decisions if you establish financial system that works for your business and ask for advice from financial advisors.