It’s not your fault you’re in a pandemic. Things are a bit crazy, and it’s overwhelming to figure out finances in an economic downturn. If you’re having financial stress, even moreso. But, eventually, you have to take a hard look at exactly where your money is, and where it is going, in order to have more peace. How can you take an accurate measure of your household’s financial wealth, both for now and your future?
Debt-to-Income Ratio
In an utopian world, your family would carry no debt. In the real world, medical emergencies and educational necessities happen. Your debt to income ratio is the individual percentage of your money each month which goes directly to paying off debts. This includes credit cards, outstanding bills, and mortgages. In order to be financially secure, less than 43% of your monthly income must go to debt. Don’t panic if you’re not there yet: knowing your ratio increases your ability to change it!
Insurance Coverage
Figuring out the right amount of life insurance coverage for the adults in your family is critical. Often, individuals do not consider carrying insurance until they are much older, or unwell. However, it’s less expensive to get an initial plan when you are younger and in good health. Out of those who have life insurance, 20% say they don’t have enough.
Heal Your Relationship to Money
Individuals seeking to heal their relationships to money need to first know debt to income calculations. Then, they need to individually see which credit accounts can be paid down in order to lower the ratio. Financial healing has been found to be one of the foremost ways to bring healing into relationships, whether between partners or extended families. Being willing and able to become accountable for spending increases the overall capacity for a family to not only become financially wealthy, but also to continue to become emotionally healthy. Who doesn’t want that?
Your finances can be a big stressor both now and in the future. It can be tempting to hide in the sand, especially when struggles happen. However, looking at finances squarely can improve not only your mental health, but your family’s mental health, and help you begin to progress towards a more stable future. You will know what changes need to be made and be capable of making those changes. That is true financial power.
If you are worried about planning for your future, let us help you out!
