Financial Planning

What Does It Look Like To Be Financially Healthy

I was having a conversation the other week with a friend and they asked me this question “What does it look like to be financially healthy?” It’s a really great question and one that took me awhile to think about. With physical health, we know what it looks like: it means eating healthy, working out, getting outside, having a safe BMI.

But what does it look like to be financially healthy? While the answer depends for each person, I came up with a few key characteristics I would look for as signs of being healthy.

You Have Enough Cash On Hand To Weather The Storms That Come

We don’t know what storms are coming our way or when but we sure know that storms are coming. It could be a medical emergency, loss of job, car accident, or a plethora of other things.

This is the key reason having an emergency fund is crucial. Yet most Americans cannot weather a $500 unexpected expenses. Do not let this be you. Not having a cash reserve means selling investments, swiping a credit card, borrowing against equities, etc. All horrible options.

You Understand Your Cash Flow

Cash flow is the key piece of your financial life. Way too many people choose to ignore the numbers and hope their spending is inline with where it needs to be. I promise you, if this is your plan, it won’t be. Take some time to dig into your own numbers, running from the problem won’t solve it.

Your Spending Is In Line With Your Income

Listen, I get it. We all want nice things. The nice house, the nice car, the nice clothes, the nice vacation, but we cannot have it all. Part of life is understanding this and spending based on what your income is. I am in no way saying you can’t have those things if you income allows it, but if it doesn’t, then you have to delay these wants. As your income grows you can have more. It’s an ever bigger reason to invest in yourself and grow your income.

You Have A Plan For Your Goals

If you said “I want to buy a house in 2 years” and I asked you how you were going to do it, your answer needs to be more than “save some money to get there.” This is not how you achieve goals. You need to have a clear path and know what you need to save each month and year to get there. Then you have to understand how that interferes with every other goal you have. This is why having a financial plan is so important. In all my years of being a financial planner, one of my biggest realizations is that most do not know nor have they thought deeply about their goals. And once they do, they realize they can’t accomplish everything on that list. This is where digging deep and prioritizing becomes so important.

I don’t care if you work with an advisor or do it on your own, but you need to create your own financial plan. One that looks at the numbers and sets you up for success. But don’t stop there, implement it! That’s where the real success happens.

You’ve Thought Through And Planned For Bad Things To Happen

Let’s face it, life isn’t always good. Bad things happen. You get sick. You lose loved ones. Trees fall on your house. You get sued. So many bad things can happen in life. If you do not have the right protection pieces in place you leave yourself susceptible to financial ruin. I know it sucks to think through these horrible situations, but not thinking about them does not stop them from happening. Be proactive.

This is the list I was able to come up with after thinking for awhile on what it looks like to be financially health. Do you agree?

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