What does it mean to be financially healthy? It involves meeting our needs in accordance with our finances and taking decisions to balance our expenses and our income. To achieve this, we should follow the recommendations given below.

Wise money management will improve your financial health and give you peace of mind. Good financial health requires savings, which means you must plan, manage and keep track of your expenses to achieve a financial goal. We should ask if what we buy is really necessary, what we use it for and if the cost of holding on to it is worth what we’re paying. For example, when will buying a car be useful? Is now the best time to buy one? Can I fit it into my budget? Can I afford the upkeep?

The 50-30-20 rule is another savings method. It is based on a simple strategy to set aside a certain amount of money each month. It proposes allocating 50% of our monthly income to basic expenses, 30% to personal expenses and discretionary items, and 20% to savings. By following this rule, we can achieve sound income management and obtain a good cushion of savings for contingencies or extra expenses that may arise in the future.

What about petty expenses we incur almost without noticing? The coffee we have every afternoon at the corner coffee shop, the dessert we buy after lunch, the taxi to the train or bus station... these purchases are not on our usual list but we incur them almost automatically, unaware of the amount we spend on them. We don’t think such small amounts can have a big effect on our liquidity, but we should keep track of them and try to reduce them.

Making a list of all expenses we are certain to have over the month, such as tolls, rent or the dentist, is very useful. By adding up these expenses and knowing what we are going to have to pay over the next 30 days, we can set a realistic starting budget. Although we may be tempted to include income we have not yet received, such as our semi-annual extra pay, it is better to prepare budgets ahead of time based on our fixed income.

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