Along With Physical Health, Focus On Financial Health Too

The last two years were no less than a rollercoaster for every one of us. We all saw something unexpected and recognised the importance of good health. But what does the word ‘health’ mean? According to the World Health Organization, the term ‘health’ is described as a “state of complete physical, mental, and social well-being and not merely the absence of disease and infirmity.” Certainly, one of the overlooked aspects in this definition is financial health.  

They say money cannot buy happiness but that does not mean your finances cannot affect your wellbeing. Poorly managed finances invite stress and anxiety, which have a crippling effect on your mental and physical well-being, hence affecting your overall health.  

What Is Financial Health? 

Your personal financial situation is your financial health. It considers elements such as investments, debt, savings, and retirement funds, to provide a comprehensive picture of your ability to fulfil your financial needs in the present as well as in the future. 
While healthy financial well-being gives you financial security and independence, poor financial health can have far-reaching consequences that go beyond your wallet. Monetary stress affects your mental and physical health, which could affect your social life and relationships and lead to poor concentration and sleep deprivation.  
                                                                    

How To Improve Financial Health? 

Planning is key when it comes to managing your personal finances. A financial plan serves as a road map during your travel through the journey of life. Financial planning entails a lot more than increasing your savings and reducing your expenses. It includes achieving your future goals, such as wealth creation, retirement planning, higher education, and more.   

Invest In Financial Education: Expanding your financial awareness and education is the first step in improving your financial health and overall monetary, emotional, and physical wellness. It can be tough to budget and improve your monetary decisions when you are not financially literate.  
 

Set Goals: Just like personal goals, financial goals vary from person to person. Setting a financial goal is a crucial step toward financial stability which starts with budgeting. According to your requirements, you can set short-, medium- and long-term goals.  
Short-Term Goals: Setting short-term financial goals gives you the confidence and allows you to set the foundation to reach your bigger goals. These include paying off credit card bills, rent, utility payments, etc. 
Medium-Term Goals: These are the next step towards your long-term financial goals and include paying off your home loan, education loan, etc. 

Long-Term Goals: The long-term goal is your big picture. Achieving these goals can take years or even decades. The biggest long-term financial goal for most people is to save enough money for retirement. 
Analyse Your Risk Appetite: Risk appetite refers to how much risk you are ready to take in order to achieve your goals. As we grow older and as our income and family conditions change, our desire for risk can change. Understanding and analyzing your risk appetite allows you to make informed and transparent financial decisions. 

Allocate Funds: This entails determining where to invest money in the market for a fruitful return in the future. By allocating a portfolio's assets according to your goals, risk tolerance, and investments, it seeks to strike a balance between risk and rewards. Higher the investment, the higher the potential return.  

Provide Insurance Cover: Once you have attained a healthy financial situation, you would want your family to continue enjoying the same lifestyle, even if you are not around. This is where insurance comes to your rescue in form of term insurance, unit-linked plan, etc. according to your need. Money from insurance can meet everyday expenses, relieve financial stress, and help you attain peace of mind. By getting life insurance, you are not only making sure of a better present, but also a financially secure tomorrow.  

 If you treat your money with the same love and care that you give to your body and mind, it will undoubtedly multiply.  

For more stories on World Health Day, go here. 

(Disclaimer: Views expressed are the authors’ own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)