What does financial health mean to me?
This is a crucial question anyone should ask themselves on the path to financial freedom. The answer to this question will help establish clarity on goals and milestones along the path.
For me, financial health ultimately means using money as a tool to minimize stress and maximize freedom. There are three high-level steps that have helped me get closer to this objective.
Let’s dig in.
Maintain a transparent relationship with money
This past weekend was an expensive one for my fiancé and I. We had multiple social outings involving bars, restaurants, and sporting events. At the end of the weekend, I wanted to tabulate how much we spent.
I didn’t want to do this so we could beat ourselves up — I enjoyed the weekend and wouldn’t change anything about it. I wanted to do this because it is a necessary step in maintaining a transparent relationship with money.
We could have chosen to pretend we didn’t spend much money this weekend, sweeping it under the rug and moving on with life. But understanding the true cost of our lives enables us to make better spending decisions.
What does it look like to not have a transparent relationship with money? Of the financially unengaged, 86% do not know how much their monthly debt payments are, and 62% don’t know how long they could survive a sudden loss of income.
Keep needs and nice-to-haves in check
At the most simple level, every dollar I spend is directed into one of two buckets: needs and nice-to-haves. The needs bucket entails all expenses which are required to get through day-to-day life (rent, utilities, food, etc.). The nice-to-haves bucket entails everything else.
If you aren’t careful, nice-to-haves can be easily mistaken for needs. This is when your financial health starts to take a toll.
The average monthly car payment has hit a record high of $503/month. This is a classic example of a nice-to-have being treated as a need.
A key factor in securing financial health is the ability to identify and ruthlessly minimize frivolous nice-to-haves.
Redirect energy towards meeting your potential
When you spend less time worrying about money, you have more time to focus on yourself and ask the hard questions.
What is holding you back from following your dreams in life? Do you have severe anxieties or internal issues that are crippling you from moving forward? What is it you need to feel comfortable taking a leap or embracing a big change?
If you are stressed out about money, you will have less time and energy to focus on answering these challenging questions.
If you aren’t set up to survive a sudden job loss or handle an unexpected emergency, for example, then your level of stress in regards to money will be high – taking focus and attention away from other aspects of your life.
At the end of the day, financial health enables a holistically healthy life.
As you reduce financial stress, you can focus on your goals and address other stressors, which will lead to a more fulfilling, satisfying, and well-rounded life for yourself and those you choose to share your life with.