If you have a healthy emergency fund, take your lunch to work, clip coupons and max out your 401(k) plan, Congratulations!!
These are some of the common recommendations for improving your financial health, along with reducing debt and diversifying your portfolio.
If you’re following all these rules… great!
You’re in an elite group of a tiny percent of the population!!
Even so…..
There are still other benchmarks to consider when shooting for optimal financial health.
Here are 6 of them to consider:
If you’re a dual-income couple, you can cover your fixed expenses with one income.
This means that you can pay for all your fixed costs – mortgage, cell phone bill, utilities, groceries, insurance payments, child care, etc. – with using just one income. If you’re not there yet, make it a goal and work towards it.
You live below your means.
We all have good intentions when it comes to saving money, right? No one sets out to become broke. A loan here, a bad investment there, and a couple hundred swipes of the credit card later and we’re busted! Most well-off people live well below their means. They don’t worry about driving the nicest cars or living in the biggest houses. They believe that true financial independence is more important than showing off their social status. We like to think so, but most millionaires don’t live a Hollywood lifestyle. Most millionaires are people just like you who work hard, don’t live in fancy houses, and drive used cars. In fact, you never would guess that they were millionaires. They get out of debt and stay out of debt!
You don’t have a car payment
Your car is paid for and you’re saving monthly in a “car replacement” fund for your next car. Having a car payment means your car is actually not even yours! It’s owned by the bank or financial institution that loaned you the money to pay for it. When you take out a car loan, you’re telling the lender that you promise to pay back the amount they loaned you (plus interest) within the time frame you both agreed upon. One of the biggest costs holding people back is car payments. Americans owe more than $1.22 trillion in car loans alone. Houston… we have a problem!!
You aren’t “house poor”
Here’s a tip…. most financial advisors recommend that your house value should not exceed 2 to 2.5 times your income, and your mortgage should be no more than 80% of the value. Example…. if your income is $100,000, your home’s value shouldn’t exceed $250,000. An added bonus is putting down 20% or more on your home and avoid paying costly Private Mortgage Insurance (PMI).
You have a will and other legal documents in place
Estate planning isn’t just for wealthy people. At a minimum, every adult should have a will and a durable power of attorney for finances and health care. And if you have children under 18, making sure that you have guardianship provisions in place for them from day one will set you ahead of most people.
You give at least 5% of your income to charity.
Charitable giving indicates a healthy relationship with money. One common question we hear all the time is this, “If I’m in debt, how can I possibly give?” That’s a valid question but the truth is, giving should always be a priority, no matter what. That means prioritize Giving after your family’s needs are taken care of. You’ll be amazed at how, just a few sacrifices, can make a major difference and allow you to give in ways you’ve never given before. Over time, as you develop these new habits, giving will just become a part of your life
Finally…..
As with anything in life, achieving these benchmarks will require discipline and hard work!
But the rewards are sweet!
Anyone can achieve financial fitness, irrespective of income level. It’s a fact that has been proven time and time again.
There is very little correlation between income level and financial fitness.
And like physical fitness, financial fitness is more about changing behavior and lifestyle.
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Until next time…..
Agree or disagree? I love your comments! So please let me know your thoughts in the comment section below.
I look forward to hearing from you!!!
Althea
Helping God’s people realize and achieve their true financial potential, become debt-free, build wealth and give generously!!
PS. Financially, most of us know what to do; we just have trouble doing it. That’s where a coach can help. CONTACT ME for a FREE 15-minute consult.
