If there’s anything we’ve learned from the experiences of the past two years, it is that financial health matters. Always expect the unexpected when it comes to your finances.
When we think of health, we usually think of physical health, followed by mental and emotional health. But another often overlooked aspect is financial health, which can be just as important as it affects your daily life and future. Physical, mental and financial health are all interconnected. That’s why we say “healthy, wealthy, and wise”. Taking care of your financial health can help you to avoid undue distress that will negatively impact your physical and mental health.
If you are financially healthy, it means you are economically secure enough to handle both expected and unexpected circumstances. You are able to pay your bills, have enough savings for any emergencies and can comfortably meet your debt obligations.
You don’t need to be rich to be financially healthy; you just need to manage what you already have. Someone with a large income can just as likely be financially unhealthy if he does not manage his finances well. Someone with a smaller income can be financially healthy if he manages his obligations well and has enough savings. Two people can have the same income, but the person who manages his finances well will definitely be more financially healthy.
Financial health is the current state of your monetary situation, such as your credit, debt, savings, investments and income. This can improve or diminish over time due to environmental factors, lifestyle and, as we’ve learned, unexpected events. It varies with each individual.
Getting a clean bill of financial health is just as important as getting a clean bill of health from your doctor. These are the signs of sound financial health. If you haven’t achieved these, you can set them as your goals.
Just as important as your income, your lifestyle plays an important role in determining whether or not you are comfortable. Comfortable means you’re not worried about how to make ends meet, and you can afford to treat yourself occasionally without breaking the bank or having to take on additional debt.
It’s ideal to have no debt at all, but in today’s world, isn’t realistic to expect everyone to have zero debt. It’s not impossible, though. With prudent management, you can achieve this.
If you have more than one financing to service, a personal financing can help you consolidate all your payments into one monthly installment that may even be lower than your current total payments. It also helps if there are additional benefits, like with RHB Personal Financing-i*, which offers financing of up to RM200,000 and tenure of up to 10 years.
If you’re meeting your scheduled payments on time without stressing over it, it’s a sign of good financial health.
Short-term goals include making a downpayment on a home or car, while the long-term goal is to retire comfortably. Setting aside a fixed amount to save and invest each month can help you to achieve these goals. You can easily set up automated savings from your online banking account. Take it a step further with a sound retirement plan to complement your EPF savings.
Your discipline in meeting your monthly payments for your credit card, personal financing, etc, will be reflected in your credit score. This gives the bank a good idea of your credit worthiness and may improve your chances of getting further financing. You can check your credit score through a credit report agency such as CTOS.
Ideally, you have three months of income in your emergency fund, in case you lose your job or have an unexpected expense. We take care of our health as best as we can, but sometimes, you never know what could happen. If you have a solid insurance/takaful plan, you are on the right path, as it can save you a lot of worry.
You can combine different tools to help you meet your short term and long-term savings goals. For short-term goals, you can compare interest/profit rates to see which is the best deal. For long-term goals such as retirement, a bancassurance product such as RHB Prime VantageLife Plus1, RHB Treasure 1001 or even Unit Trust2 investments can help you accumulate savings in a disciplined manner.
Look out for these red flags that show you need to work on your financial health. Sometimes, things happen that are beyond our control, but remember, whatever the situation, there is always help. You can approach your bank or bodies like AKPK (Agensi Kaunseling & Pengurusan Kredit) for assistance in restructuring your payments.
While it sounds technical, it’s actually pretty easy to calculate. It’s simply how much you owe each month compared to how much you earn, in a percentage. Add up your total debt and expenses and compare it to your income.
A high debt-to-income ratio signals that you may have too much debt for the income you have. Ideally and realistically, it should be around 30%-45%. To lower the ratio, reduce your monthly recurring debt, and/or increase your gross monthly income. This can be done by reducing unnecessary recurring expenses, such as subscriptions to services you don’t use, or making small lifestyle changes. You can also invest so that you will have a little extra income.
This doesn’t require any calculation. If you find yourself regretting that dinner out or regularly borrowing from others to get through each month, it’s time to re-evaluate your priorities. While it’s good to treat yourself to something nice once in a while, take care not to splurge on unnecessary items that you can’t afford. It’s completely fine to use second-hand items that are in good condition. You can get these items cheaply, or for free, with a little legwork on social media. There are “beli nothing” groups online for everything from furniture to electronics and clothing.
Late or missed payments can negatively impact your credit score. As mentioned earlier, all it takes is a few minutes to check your score on CTOS.
Missing payments on your credit cards can be stressful as this will affect your credit score and there will be interest incurred. One way to improve credit score is to change your payment behaviour and you may also consider applying for a Balance Transfer to transfer your card balances to RHB Credit Card/-i to manage your payment better. If you’re a new customer, enjoy 0% interest/actual management fee. This can help buy you some time to get your finances in line.
Banks are here to help you reach a win-win situation. If you’re under a lot of pressure due to loss of income, talk to RHB about restructuring or rescheduling your payments.
You don’t have enough in your emergency savings to last you for at least three months. This is more common than we acknowledge. With increasing living expenses, it can be hard to set aside money every month. Start small, because that’s better than nothing at all. Once you get into the habit, it will become easier to make further changes and set aside a little more. There are tools that can help you to save, such as apps that take your change from daily spending and invest it for you. You can also approach your bank for investment tools that can help you save in a disciplined manner.
A good tool is an insurance/takaful plan that provides coverage for emergencies and invests for you as well. Sikit-sikit, lama-lama jadi bukit.
Overall, financial health is achievable. The lessons we’ve learned have been tough, but we can take this as a sign to better ourselves so we can live our best lives, stress-free.