Financial health is an aspect of life that is often overlooked. By overlooked, I mean that most of us wing it. Till a few months ago, I was a member of the wing it club. But I experienced a rough wake-up call that compelled me to evaluate my financial growth. I now believe the lack of financial literacy is the cause of the constant poverty in our society. Most of us do not invest in financial literacy and this adversely impacts our financial health.

I came across a quote by Robert Kiyosaki, “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” This quote changed my perception of financial health and life in general. I worked out a strategy to retain as much money as possible for investments and other income-generating projects. In this article, I will highlight some crucial aspects of financial health as I introduce financial planning and empowerment.

You will become wealthy if you acknowledge that what matters is not how much money you make but how much you retain. Click To Tweet

Understand your Financial Situation.

The most important thing is, to be honest with yourself about your financial situation. A principle I hold dear is that I never trust people who are not honest with themselves. The key to success in all endeavors in life is, to be honest with yourself. For instance, during my pursuit for academic excellence being honest helped me so much. Being honest with myself about the subjects I did not understand allowed me to seek assistance and consequently perform better.

This is a similar case in financial health. Being honest with yourself about your financial situation helps you to live within your means. It also helps you define an appropriate lifestyle. Adopting lifestyles that we cannot finance is the primary sign of an unhealthy financial situation. You might be wondering how you can understand your financial situation. It’s simple by answer the following question:

How many sources of income do you have? One needs to have different sources of income for instance salary from your main job, income from your side hustle, or income from a business you have set up.

How much money do I earn in a month? It is important to consider your net pay or rather the amount that reflects in your account each month after all deductions are made.

What are the mandatory bills I’m required to pay each month? Such bills could include rent, insurances (e.g. health), food, and transport allowances.

Assess your Financial Requirements

After understanding your financial situation, it is imperative to assess your financial requirements. Such financial requirements will help you plan for the future. The key to financial empowerment is knowing how much money you need in a month and planning several months ahead. How do you do that?

For instance, let’s say you need 15,000 Kenya shillings on rent, 10,000 on food, 5,000 on clothes, 3,000 on entertainment, and 7,000 on transport every month. That totals to 40,000 Kenya shillings every month. This is your financial requirement for every month. The imperative thing is to set up a saving account with at least 80,000 Kenya shillings. This is your financial requirements for 2 months.

This is good financial planning because, in the worst-case scenario such as losing a job, it means you can live for 2 months as you get back on your feet. It is challenging to raise such a large sum of money but it’s a worthwhile challenge. The key here is to know your financial requirements. Anyone who does not know their financial requirements is very likely to misuse their money. Knowing your financial requirements also helps you understand your financial situation.

Develop Financial Goals.

Financial goals will help you move from financial instability to financial stability. Such goals can either be intermediate, short-term, or long-term. The ultimate goal is to achieve financial stability and freedom associated with financial empowerment. 

For instance, my goal is to invest more. Understanding my financial situation and assessing my financial requirements helps me adjust my investment fund each month. To achieve this, it is always important to assess alternatives. For instance, purchasing household essentials in bulk and from wholesalers help you reduce financial requirements in the short term. Retailers are expensive so buying necessities from wholesalers helps you save money. This is what it means to assess alternatives.

It is important to develop SMART financial goals. By SMART goals I mean Specific, Measurable, Attainable, Relevant, and Time-bound goals. It is important to have a vision of the financial situation you aim to achieve. Having a specific figure in mind will help you create a measurable goal. The figure should be realistic. For instance, if you have an income of 100,000 Kenya shillings per month, you can set a goal to reach 130,000 in the next month. This is not only attainable but also relevant or rather achievable by having an extra income source. Finally, the goal should be time-bound for instance tracking each month’s financial situation.

Improve your Financial Health

The key to financial empowerment is understanding your financial situation, acknowledging your financial requirements, and defining financial goals. Understanding your financial situation will help you know your income within a certain period. Assessing your requirements will help you know your expenses within the selected period. Consequently, you will know the amount of money you retain within the period. To increase the money retained, identify alternatives that reduce your expenditure and consequently increasing the money you retain to invest. Checkmate, financial empowerment.

The key to financial empowerment is understanding your financial situation, acknowledging your financial requirements, and defining financial goals. Click To Tweet

We all have different financial plans. The plan I have shared above has empowered me financially. This article was an overview or rather an introduction. I am neither a certified financial advisor nor a very wealthy person but I believe I’m on the right path towards financial stability. I share what works for me and what doesn’t to create awareness of financial health and raise the need for financial literacy.

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