They have no debt, an adequate emergency fund, and a decent amount in their retirement savings. How did they get there, and how can I do the same?
Most people want a silver bullet that immediately leads to financial health. Unfortunately, those silver bullets do not exist. Achieving financial health is a process that requires time, effort, and a commitment to certain principles.
While I cannot provide you with a silver bullet for immediate financial health, I can provide you with a short list of ingredients that, over time, will get you there. These ingredients are not magical, but they are essential. Most will not do these things, but financial health can be obtained for those who will.
What are the essential ingredients for financial health? Here are four:
Key ingredient #1: Trust in God’s Word.
God has a plan for you and your relationship with money. This plan is simple, but it can be counterintuitive. God’s plan starts with generosity. Yes, the biblical foundation for financial health begins with releasing money, not keeping it. God has designed us not to be hoarders but conduits through which His generosity flows. We give, then save and then live on the rest. Trust in God’s Word and let Him define financial health for you.
Key ingredient #2: Planning.
According to the U.S. Financial Health Pulse Trends Report, only 36% of households plan ahead financially. What would happen if you went on a family road trip without an identified destination and a plan to get there? For some, that scenario may sound fun. For most of us, it sounds like a stressful nightmare. So why do we treat our financial journey differently? And why are we surprised when we find ourselves in a stressful, financially fragile mess?
Planning is a necessary ingredient for financial health. You must have a goal and a strategy to get there. The plan doesn’t need to be perfect, but it should be thoughtful. If you are looking for a guide, consider the 8 Money Milestones. These milestones can provide a roadmap to help you navigate your financial journey with clear, actionable steps.
Key ingredient #3: Discipline.
Once you have a plan, you must execute it. You will be tempted to do other things with your finances—like spending it on a lavish vacation instead of paying off debt. A plan without discipline is bound to fail. Fortunately, technology allows us to automate much of our financial journey. Giving, saving, and paying bills can all be automated. So, take advantage of technology when you can, and remain disciplined. Stick to your budget, monitor your spending, and focus on your financial goals.
Key ingredient #4: Patience.
I mentioned earlier that there are no silver bullets that lead to immediate financial health. Achieving financial health takes time. It takes time to pay off debt, save for an emergency, and set aside money for retirement. Don’t get frustrated when your debt is not paid off in six months. Be patient. Those of us who are financially healthy did not get there overnight. Patience was a key ingredient in our journey, and it will be for yours. Celebrate small victories along the way and keep your long-term goals in mind.
Additional Tips for Financial Success
Educate yourself.
Continuous learning is crucial for financial health. Countless resources are available, including books, podcasts, online courses, and financial advisors. Educate yourself on various aspects of personal finance, such as investing, saving, budgeting, and tax planning. The more you know, the better equipped you will be to make informed financial and stewardship decisions.
Live below your means.
Living below your means is one of the simplest yet most effective ways to achieve financial health. This means spending less than you earn and avoiding lifestyle inflation. It’s easy to fall into the trap of increasing your spending as your income rises, but maintaining a modest lifestyle can help you save more and avoid debt.
Avoid debt.
While some debt, like a mortgage, can be considered an investment in your future, unnecessary debt should be avoided. High-interest debt, such as credit card debt, can quickly spiral out of control and hinder your financial progress. Focus on paying off any existing debt as soon as possible and avoid taking on new debt.
Build an emergency fund.
An emergency fund is a crucial component of financial health. It provides a safety net for unexpected expenses like medical bills, car repairs, or job loss. Aim to save at least three to six months’ worth of living expenses in a readily accessible account, like a high-yield savings account. This fund can help you avoid going into debt and continue to give generously when unexpected expenses arise.
Invest for the future.
Saving for retirement and other long-term goals is essential for financial health. Take advantage of retirement accounts, such as 401(k)s or IRAs, and invest regularly. The power of compound interest can significantly grow your savings over time. Diversify your investments to reduce risk, and work with a financial advisor if you need help creating an investment strategy.
Achieving financial health is a journey that requires trust in God’s Word, careful planning, discipline, and patience. You can attain financial health over time by following these essential ingredients and incorporating additional tips like educating yourself, living below your means, avoiding unnecessary debt, building an emergency fund, and investing for the future.
Remember, financial health is not achieved overnight. With dedication and perseverance, you can reach your financial goals and enjoy the peace of mind and increased ability to live generously that comes with financial stability.
This article was previously published by Art Rainer on the Christian Money Solutions website. Click here to check out more helpful financial resources from Art Rainer.
