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The 2024 Financial Health Pulse U.S. Trends Report revealed that 70% of participants were deemed financially unhealthy. Many faced challenges in growing savings, managing debt, and exercising spending control.
Should you find yourself among them, it’s likely that financial concerns frequently cause you stress, making it hard to progress towards your financial objectives. However, small sacrifices and a shift in your money management approach can lead you toward a more stable financial condition.
In a recent YouTube presentation, financial expert George Kamel proposed seven strategies to promote financial well-being.
Monitor Your Finances
“Individuals with solid financial health are mindful of their monetary situation. They establish a budget, regularly monitor their expenses, assess their accounts, and make necessary adjustments throughout the month,” stated Kamel.
If you’re apprehensive about uncovering unpleasant truths, you may hesitate to examine your finances. Yet, unpaid bills, substantial balances, and similar issues won’t resolve themselves. Actively engaging with your financial situation fosters awareness and accountability.
Don’t Manage Finances Alone
Handling your finances independently can create pressure and lead to decisions based on panic or inadequate information. Kamel emphasized that financially secure individuals often collaborate with financial advisors and supportive peers who assist them in making informed financial choices and accomplishing their goals.
Kamel also highlighted the importance of spouses engaging in honest dialogues about finances, sharing bank accounts, budgets, and financial decisions. While keeping finances separate may seem like a good way to maintain privacy, it can complicate money management and lead to conflicts.
Be Deliberate With Your Purchases
Impulse buying is a widespread practice that undermines financial stability. Ramsey Solutions found that Americans, on average, spend $150 monthly on unplanned purchases.
It’s wise to minimize purchases that fall outside your budget. Kamel encouraged people to focus on significant purchases, which can still be enjoyable, while adhering to the popular 24-hour rule. “For items over a certain price, take a day to contemplate whether it’s still a good idea without the rush of making a purchase,” he recommended.
Other methods to cultivate intentional purchasing include establishing a sinking fund, removing payment details from online shopping platforms, and opting for cash transactions.
Achieve Balance Among Spending, Saving, and Giving
Interestingly, saving or giving excessively can be as detrimental to financial health as overspending. Kamel advised maintaining equilibrium among these three areas to prevent bankruptcy or missing out on experiences.
His suggested framework includes allocating 10% of earnings to charitable contributions, investing 15% after establishing an emergency fund and settling debts, and using the remaining funds for mindful spending and other objectives.
Make Interest Work for Your Benefit
According to Kamel, consumer debt is a major barrier to financial wellness due to the burden of interest payments, which should be addressed promptly.
“The one exception is a mortgage, which should ideally be a 15-year fixed-rate loan paid off early to reduce total interest paid,” he noted.
Following this, you should aim to generate returns through investments and leverage compounding to enhance your funds’ growth over time. For example, investing $15,000 at a 7% rate could yield approximately $30,000 in 10 years, $58,000 in 20 years, and $114,000 in 30 years.
Safeguard Your Accumulated Wealth
As one adverse event can jeopardize your financial stability, Kamel suggested maintaining an emergency fund to cover three to six months’ worth of expenses. This way, unexpected costs become minor inconveniences rather than catastrophic events.
Insurance policies also play a crucial role in protecting your wealth. Kamel recommended obtaining term life insurance valued at 10 to 12 times your income, alongside adequate car and home insurance for liability coverage.
Let Go of External Opinions
“Financially secure individuals disregard the opinions of others. They have transcended comparisons and concentrate on what they can accomplish with their own resources,” stated Kamel.
Worrying about perceptions can lead to poor financial decisions, overspending to gain approval, and diverting from your financial goals. According to a LendingTree survey, 51% of Americans confessed to overspending to impress someone.
Maintain your focus on enhancing your financial well-being and be cautious of outside influences.
