How To Check Your Financial Health
Money can play a crucial role in determining your quality of life. If you have a strong grip on your finances, then you’ll be able to avoid the chronic stress and uncertainty that comes with money troubles.
If you’re looking to kick-start a new chapter of financial responsibility, you might seek to review your finances. But this shouldn’t be a one-off step, but a regular one, designed to keep your finances in check. But what exactly should such a review consist of?
Evaluate Your Overall Financial Health
‘Financial health’, much like physical health, covers many different aspects of life. If one of these aspects is not up to standard, then you can expect to suffer problems, no matter how good the others look. Thus, a review of your financial situation means looking at income and spending, and how these align with your long-term financial goals. In particular, you might look at the amount you’re spending on debt, and how much interest you’re paying each month.
Create and Maintain a Budget
Once you have an idea of your financial health, you can start to draw up a monthly budget. This should help you to work toward your goals, incrementally. So, if you want to save up for the deposit on a house, you might set aside a given amount in savings each month.
A budget will help you to allocate as much money as possible to the things that really matter to you. It can be useful to divide your spending into necessary and unnecessary. Unnecessary items of spending, like a Netflix subscription you barely use, might be dispensed with. But necessary spending, like your gas bill, might be driven down by simply shopping around for other providers.
A good budget isn’t necessarily one that eliminates luxury altogether. But it should ideally help you to spend consciously. If you have set aside twenty pounds each week for visiting a café, you’ll be able to do it guilt-free, knowing that you’ve allocated funds toward your other priorities.
Budgeting, again, isn’t a one-off exercise. Make sure that you review and update your budget every month or two to reflect your changing circumstances. You can do this using pen and paper, or by using a specialised app.
Understand and Monitor Your Credit Score
When your creditors decide how much money they want to lend you, and how much interest they’re going to charge, they’ll look for an objective assessment of the risk you present. This is done using a credit score, which come from a handful of special agencies. Your score reflects your past behaviour, and it can play a crucial role in shaping your financial future. If you want to understand your credit score and how it works, there are a number of online guides that can be very helpful.
Seek Professional Advice for Debt Management
If you’re worried about debt and how you’re going to manage it, it can be helpful to obtain the advice of the right professional. There are a number of UK-based organisations that can offer you free support to help drive down your debts and provide solutions and strategies that match your own personal circumstances.