We often talk about financial health. It’s a vitally important concept. Your financial health is no different than your physical health, emotional health, or anything else in terms of your overall wellness. Holistically, it’s a major part of a healthy life.
But what does it mean to be financially healthy?
The following basics are must-knows for good financial health at any age, but especially for young adults who are just beginning to build up their financial foundation. You want this foundation to be solid and strong. It’s what will support you and your dreams for years to come.
- Eliminate high-interest debt. Yes, that means it’s time to get out of credit card debt for good. Don’t think it’s a big deal to max out a card or let that balance keep rolling over? Wrong. Even if your friends/neighbors/coworkers/peers have credit card debt, that doesn’t make it healthy. When you’re paying for your past, you can’t build your future.
- Start your emergency fund. Ideally, this fund amounts to at least four to six months’ worth of living expenses, but don’t let the number hold you back. Start saving any amount. You’ll be glad you have it if and when you need it. And if you’re still working on #1 above, make sure to fit in some savings as well. Otherwise, you could eliminate credit card debt only to be forced right back into it if a financial emergency happens and you have no savings at the ready.
- Start investing for retirement. The sooner, the better! Once you are free of high-interest debt and have started your emergency fund, it’s time to invest. Starting now, even with a small amount, will change your financial future.
When you have these three steps checked off, you can approach your future with confidence in a clean bill of financial health. With a strong financial foundation supporting you, what will you do next? Travel the world? Start a company? Move to the city of your dreams?