5 Steps to Improve Your Financial Health in 2023
An individual’s financial health is often determined by income, credit score, or overall net worth. In reality, your financial health is determined by factors that paint a picture of your relationship with your money. This involves how well you allocate your income to your expenses, how you handle debt, and whether you have the freedom to make tough financial decisions.
The past year has influenced many households and influenced their financial health. The rising inflation rate has seeped into budgets and reduced the purchasing power of many people. Although global inflation is expected to fall to 6.6 percent in 2023 and 4.3 percent in 2024, the rates are still above pre-pandemic levels. So, you need to take the following steps to improve your financial health this year.
1. Understand Where Your Money Goes
It’s normal to lose track of where your money goes if you have several bills. However, it’s important to understand where your money goes to gain a better sense of your financial health. This involves tracking your sources of income, bills, debt, and other expenses.
Whether you have one source of income or two, note down how much cash flow you expect each month and allocate the income to separate accounts. You can use a notebook or a phone app to track where your money goes each month to understand which areas need adjustment. For example, if you’re spending a lot on groceries, you could look for ways to reduce costs by shopping for essential items in bulk or utilizing coupons.
2. Automate Your Savings
Automating your savings is one of the best ways to ensure a positive cash flow. This is particularly helpful for those who tend to spend more than necessary. Automating your savings can prevent you from overspending on non-essential products or services and help you create a fund for the future.
Set up automatic transfers in sync with your income cycle to ensure the money is transferred between accounts when you receive your pay. Doing so will help you maintain financial discipline and ensure sufficient funds are in your account when needed.
3. Strengthen Emergency Funds
The last two years have shown us the importance of having an emergency savings account to navigate challenging economic times. An emergency fund offers a safety net in case of an unexpected event, such as job loss, unplanned medical expenses, and major car or home repairs. Lack of an emergency savings fund can result in failure to make timely bill payments or require you to cash some of your assets. So, it’s important to strengthen your emergency funds to improve your financial health in 2023.
If an emergency arises before you can set aside sufficient funds, you can also take a short-term loan. An online loan through a platform like GoDay will offer you quick access to cash with a simple application. You can use the money for unforeseen expenses and add any remaining cash to your emergency funds account.
4. Plan Before You Spend
Being cautious of how much money you spend can help you maintain your financial health. Once you’ve determined how cash flows into your account each month, create a realistic budget to control your spending. This applies to both your fixed and occasional monthly spending. For fixed spending, such as groceries, set a specific amount and stay within that limit if possible. For occasional spending, such as vacations, take the time to plan out each aspect of the trip and look for ways to save. For example, you can compare the price of hotels on different platforms to ensure you’re getting the best price.
5. Get Professional Financial Advice
Financial literacy is the first step towards improving your money management skills. If you need help understanding how finances work, consult a professional financial advisor. You can also seek help from a friend or family who can maintain their financial health. Take the time to set reasonable goals and look for ways to meet them this year.
This article has been published in accordance with Socialnomics’ disclosure policy.