Financial health is a difficult thing to define. Like with physical and mental health, though, it’s easy to know when something isn’t quite right. Furthermore, there are plenty of studies that have shown poor financial health can actually lead to worse mental and physical well-being. This is why it’s important to recognize when something is off with your relationship to money.
When it comes to identifying the key components of financial health, there are a few concepts that stand out from the rest:
- – Your debt levels
- – Your debt mix
- – Your cash flow and income
- – Your debt-to-income ratio
- – Your savings
- – Your ability to generate passive income
These ideas are integral to any person’s financial health and security. When several of these are out of balance, you’re going to feel the effects throughout your life. Let’s take a look at how to manage these key components of financial health.
Balancing Your Debt and Income
Debt and income are arguably the most critical aspects of financial health. When you have too much debt for your income level, it can quickly lead to serious money problems. Having a lot of debt but no, or even negative, cash flow means you’re not going to be able to make any progress on paying down what you owe. And saving or investing your money will be completely out of the question.
This is why debt, income, cash flow, and debt-to-income are such key elements of your financial health. While you can take on greater amounts of debt when you’re bringing in more money, it’s also wise to remember that income can be cut off for a variety of reasons. You might lose your job; the economy could enter into a recession, or you might have to make drastic changes to your lifestyle due to unforeseen circumstances. No matter the cause, the effects of being stuck with too much debt can ruin you. Therefore, you need to take special care to not overextend yourself with debt.
Finding Ways Out of Debt
Those who have bitten off more than they can chew when it comes to debt will probably be looking for ways out of their situation. There are many options available to consumers regardless of their current financial health.
One option that can be popular is paying off debt with different forms of debt. Debt consolidation is one way many people have been able to get a handle on finances. But what if you’ve already been unsuccessful with this? If you have too much debt and need to find a way out, a bad credit home equity loan might work for you.
Those who have too much debt tend to have credit struggles as well. This is because your ability to pay your bills is the most important factor in determining your credit score. People who own their homes can utilize a bad credit home equity loan to utilize the equity on their house to get a loan at a lower interest rate.
This can help pay down some of your higher-interest debt and potentially get your financial health back to a better place. The risk of this is that if you’re unable to repay your home equity loan, it could result in the loss of your house. Therefore, you need to be confident in your ability to repay the loan before taking this route.
For pretty much all people, speaking with a credit counseling service is one of the smartest ideas for figuring out how to regain your financial health. These are organizations that specialize in helping people get a handle on their debt. Additionally, much of what they offer is completely free; so there’s no harm in simply speaking to an agent.
Your financial health is critical to your general wellbeing. When your relationship with money is out of whack, it can have dire consequences on your whole life. Knowing the key elements of financial health is the first step to making positive changes toward a better financial future.
Masab Farooque is a Tech Geek, Writer, and Founder at The Panther Tech. He is also a lead game developer at 10StaticStudios.
When he is not writing, he is mostly playing video games