Having healthy finances is a major key to being more independent and living a less stressful lifestyle. Knowing how to take care of your money and keep your credit score up puts your financial future in your hands and empowers you to make your own decisions and not have them made for you by virtue of poor financial health.
Set Aside Some Emergency Money
Life is unpredictable, so it’s a good idea to set aside a rainy day fund in case you get sick, hurt, or get another unexpected expense. There are several different ways to set aside some emergency cash:
- Set aside small dollar amounts every day, like $3 a day for 30 days, and let it accumulate over time
- Work an emergency fund deposit into your monthly budget and stick to it, adding it to a completely separate savings account
- Find a way to cut back on certain monthly expenses, then take the money that you would have spent on those things and add them to your rainy day fund.
Pay Your Credit Card Balance in Full Every Month
Not paying your credit card balance in full at the end of each and every month is one quick and easy way to get into a debt cycle. You can call your credit card provider and find a way for the full balance to come out of your account every month so that you don’t even have to think about it.
This is one major key to financial success because if you do not pay your balance in full, then credit card companies will charge you high amounts of interest on the leftover debt that you didn’t pay from the first month.
Check Your Credit Score Frequently
It’s not true that checking your credit score lowers it. This is because when you check your own score, you make a soft inquiry about it. However, if a lender checks your credit score, they may perform a hard inquiry that lowers your score. With this debunked, keep an eye on your credit score to check for fraudulent activity.
You can dispute this score if you find fraudulent activity. Before you make any financial decisions, though, you should research how they affect your credit score. Even if it will help you in the long run, like debt settlement, you may reconsider when you find out it hurts your score.
Invest, and Keep a Diverse Portfolio
Investing is a great tool that will bring you closer to financial freedom. Whenever you start investing, you need to make sure that you are not putting all of your eggs in one basket when it comes to stocks. Diversifying your portfolio protects you against market shocks.
Diversifying also means getting familiar with not just stocks in different kinds of companies, but in investments in things other than stocks such as bonds and other assets. Either way, you are reducing risk and maximizing your potential for profit.
Protect Yourself and Your Income
Financially, one of the best defenses you have is insurance. Insurance can help you avoid some of those expenses that come up out of the blue like damages to your home caused by natural disasters and car accidents, so it is always a good investment.
However, you should also insure yourself with specialized insurance policies depending on your profession. For instance, disability insurance for doctors can help them keep their practices even when they are sick or injured, which can help them take time to take care of their own health as well.
Financial fitness does not have to be as far away as it can sometimes feel. With these five steps, prosperity is not as much of a fantasy as it it sometimes made out to be. Between active financial planning, taking care of your money, and taking care of yourself, you can easily get to a solid financially fit state of being.
