Having good financial health is one of the most important factors of financial stability. This article discusses financial health, indicators and ways to stay healthy.
understand financial health
Financial health is a measure of a person’s ability to manage his finances. in a favorable financial situation The person’s expenses do not exceed his income.
Money is not the key to happiness. but at least with money You can choose a wider life in the future. For example, money can’t buy health. But at least if you have the money You can go see a doctor, so being financially healthy can indirectly reduce your stress. and ultimately improve the quality of life
financial health indicators
Many people think that as long as expenses do not exceed income. A person’s financial status can be said to be in good health. This opinion is true. But there are times when people have to borrow money because they have special needs. Therefore, there are several indicators for determining financial health.
Here are some financial health indicators according to Prita Ghozie:
1. Have an emergency fund
An emergency fund is a savings fund dedicated to urgent needs. Whether it’s due to health problems or from economic problems such as fired, pandemic, etc. The minimum amount of this emergency fund varies from specialist to specialist. However, it is recommended that you prepare an emergency fund at least 3 times your monthly expenses. yours
For example, if your monthly expenses are IDR 1,500,000, you must have at least IDR 4,500,000 as an emergency fund. This is based on the assumption that within 3 months the fired workers will get their jobs back.
with this ratio Of course, you need to prepare larger emergency reserves when you get married. Because your needs for family are definitely greater than your needs when you’re single.
2. Able to manage debt
Not forever. People can be free from debt. However, sometimes there are large expenses that exceed gross income. However, the size of debt still needs to be controlled appropriately in order to stay financially healthy.
Debt can consist of several components. From car payments, credit cards, to debts for coworkers. To keep your financial status in good health Debt can be divided into two types: short-term debt such as debt from friends or installments. and long-term debt Also known as debt consolidation. Make sure that your total short-term debt doesn’t exceed 30% of your monthly income and don’t forget to pay off your installments on time.
3. have an address
Shelter or shelter is one of the basic human needs. Being here means you have a place to rest and hide from the heat and rain. Having a home doesn’t always mean being able to have your own home and be independent from your parents. Of course it would be better But it doesn’t matter if you were in your childhood home or not.
4. have savings in old age
Even though it’s still far away Retirement savings are One important thing that you need to prepare early. It can be caused by many factors such as
- Not everyone is a government official, so you can. pension fund from the institute.
- Children are not investment tools.
- There is a possibility that the prices of daily necessities will increase as you get older.
- There is a possibility of health deterioration.
- It is possible that even if you are old but still want to be an entrepreneur
You can prepare for early retirement by saving the money you can afford first. It’s okay indirectly The important thing is that it exists and is consistent.
5. Able to manage lifestyle
The formula for financial health is really simple: Income = Expenses + Savings. This formula also means indirect. If you want to have a better life You can do 3 things:
- increase income,
- suspend exports,
- reduce savings
It is better if you can do numbers 1 and 2 at the same time to increase your savings. The choice is that you will either reduce your savings or increase your income.
6. Have a child education fund
Every parent wants to send their child to the best school. The problem is that the cost of education in Indonesia increases by an average of 15% every year, so you should prepare your child’s education fund as soon as possible. Again, it doesn’t have to be big right away. Small but consistent is better.
7. have insurance
Insurance is a tool you can use to meet certain needs. whether it is a health problem child’s education emergency funds, etc. Having insurance will help more or less when the need arises. In addition to BPJS, there are now a number of private insurance that you can choose based on your needs.
8. Know your family’s assets.
It is important that the person The family head (especially the head of the family) must know the property owned by his family members. This is important for a number of reasons.
- These properties can be sold if needed.
- Asset utilization can be maximized early on.
- Ownership of family property should be defined to make it easier if there are legal issues.
- These assets will be inherited. Surely you’ve probably heard of a lot of chaos because of inheritance distribution, right?
How to Maintain Financial Health for Millennials
1. Always keep a financial record.
The first way to maintain financial health for millennials is to have financial recordsThis note is important to know the history of your expenses, income and savings each month.
This financial record is more important if you are married or self-employed. Because family expenditures are certainly higher than single people. And the income of entrepreneurs and freelancers is uncertain.
2. Keep it, don’t leave it to save.
The second method is to set aside savings as soon as salaries or fees are paid. Usually the savings amount is about 10%-20% of income. Set aside savings is useful to maintain financial stability and prevent the money from being used as snacks.
3. Pay bills on time
Do you have a credit card? Or car installment at the leasing company? Or have a mortgage perhaps? So to keep your financial status healthy installments on time And if you can exceed the minimum payment value
The reason is that installment payments that are not paid on time may swell due to compound interest.compounding results). On the other hand, paying in installments with a larger amount will speed up the repayment process.
4. Develop a level of importance
The demand is many But income is limited, so you need to prioritize or prioritize needs or needs from the most urgent to the most deferred. By setting this priority You will know which needs should come first.