Finance can be a challenging topic to talk about. For some people this is a very private matter but when it feels out of control and something that people can feel very embarrassed about.
As many emotions are attached to our financial situation you can see how it can have either a positive or negative impact on our mental health. In recent years we have seen the introduction of financial wellbeing as an area of focus for our health along with our, physical, mental, and social.
Financial wellbeing is more than just a stable income or a well-padded bank account. It encompasses the peace of mind that comes from understanding and managing your financial situation effectively. One of the most empowering steps you can take towards financial wellbeing is knowing your numbers – your financial numbers, that is (but you should absolutely get your blood pressure checked for Know Your Numbers Week, too!)
Here’s why this knowledge is transformative and how you can harness its power to enhance your financial health.
Table of Contents
Why Knowing Your Numbers Matters
1. Clarity and Control
When you know your numbers, you gain clarity over your financial situation. This understanding brings a sense of control, helping you make informed decisions about your money. Whether it’s your income, expenses, debt, or savings, having a clear picture allows you to navigate your finances confidently.
2. Goal Setting for Financial Wellbeing
Clear financial data is crucial for setting realistic and achievable goals. Whether you’re saving for a home, planning a vacation, or building an emergency fund, knowing exactly where you stand financially allows you to create actionable plans and track your progress effectively.
3. Identifying Spending Patterns
By analysing your income and expenses, you can identify patterns and make adjustments as needed. Perhaps you’re spending more on dining out than you realised, or maybe your subscription services are eating into your budget. Awareness of these patterns enables you to make more intentional spending choices.
4. Debt Management
Understanding your debt situation is the first step towards managing and reducing it. Knowing the total amount you owe, the interest rates, and the repayment schedules helps you prioritise and create a plan to tackle your debt more efficiently.
5. Building Savings and Investments
Knowledge of your current financial status is essential for building savings and making investment decisions. It allows you to allocate funds appropriately, ensuring that you’re saving enough for emergencies and taking advantage of investment opportunities to grow your wealth.
Steps to Take Control of Your Financial Numbers
1. Track Your Income and Expenses
Start by listing all sources of income and categorizing your expenses. Use apps or spreadsheets to keep track of your daily spending. This habit will give you a comprehensive view of where your money is coming from and where it’s going.
2. Create a Budget
Based on your tracked income and expenses, create a budget that aligns with your financial goals. Allocate funds for essentials, savings, and discretionary spending. Stick to your budget to avoid overspending and ensure you’re saving adequately.
3. Monitor Your Credit Score
Your credit score is a critical number that affects your ability to borrow money and the interest rates you’ll receive. Regularly check your credit report for errors and understand the factors influencing your score. Aim to maintain a healthy credit score by paying bills on time and reducing debt.
4. Assess Your Net Worth
Calculate your net worth by subtracting your liabilities from your assets. This number provides a snapshot of your overall financial health and can be a motivating factor in your financial planning efforts.
5. Set Financial Goals
Define short-term and long-term financial goals based on your current financial situation and future aspirations. Having clear goals helps you stay focused and provides direction for your financial decisions.
6. Review Regularly
Financial situations and goals can change, so it’s important to review your numbers regularly. Monthly check-ins can help you stay on track and make adjustments as needed to ensure you’re moving towards your financial objectives.
Financial wellbeing is within your reach, and it begins with knowing your numbers. This knowledge not only provides clarity and control but also empowers you to make informed decisions that align with your financial goals.
By tracking your income and expenses, creating a budget, monitoring your credit score, assessing your net worth, setting goals, and reviewing regularly, you can take charge of your financial future and achieve a state of financial wellbeing that brings peace of mind and security.
