There is a lot of stress around money. Especially when we are talking about running a household budget with record breaking inflation. Understanding the concept of ratios when it comes to our finances is so critical to making sure we are in a place of financial wellness. And if we aren’t in a place of peace and wellness with our money, ratios can help us clearly see the areas of our finances that need our attention. So, are your ratios whacked? If you are wondering what I am even referring to, you aren’t alone! Let’s dive in!
There are a lot of different ratios to consider when we are talking about achieving financial peace and wellness. This is especially true when we are talking about debt – and even better, paying off debt. Our financial ratios, if not properly aligned, can really be holding us back from our goals and dreams. Out- of- whack ratios may be the one thing that is keeping you back from leaving that 9-5, to start a side hustle so you can be home more with your kids. Out- of- whack ratios may be the reason that you can’t seem to put away more money for retirement. Out- of -whack ratios may be the reason you and your spouse are constantly arguing at the end of the month over what is left in the checking account. Do you see where I am going with this? Money is hard to talk about, but NOT talking about it, and just letting things go can steal your joy and strain your marriage.
When I am coaching people on how to get out of debt, or how to pay their home off faster, achieve financial freedom and so on, we look closely at a few specific ratios. Here are a few examples of key ratios that are impacting your financial future. What is the ratio of your car payment (s) (if you have them) to your net monthly household income? What is the ratio of your mortgage or rent payment to your net monthly household? What is the ratio of your savings/investing (if any) to your net monthly household income? What is your ratio of giving (if any) to your net monthly household income? These percentages tell us so much about our financial wellness. See if our car payment is 20% of our monthly income, and our saving and investing is 5% – you are going to have a really hard time making headway in your financial future. The numbers just do not work in your favor when you have that much of your income tied up in a depreciating asset.
There are certain percentage ranges that are healthy and they are all specific to YOU and YOUR INCOME.
Ratios are such powerful tools when we are talking about finances because they are correlated directly to YOU and no one else. A reasonable mortgage amount is going to look different for the family that is netting $2,500 a month versus the family that is netting $5,000 per month. But that percent ratio for a reasonable housing budget IS the same for both families. That is what makes understanding ratios a powerful tool in achieving financial wellness.
These concepts of ratios aren’t rocket science, but man do they make a difference when they are in sync with our goals and our hopes for our future. When we have the correct ratios in place, we can pay off our debt, actually save for our future, be generous givers, and find peace in our finances. What if getting that transportation ratio in check meant you could be home more with your babies? What if getting that housing ratio in check meant that you and your spouse might stop fighting when the bills are due each month? Wouldn’t that be worth it?
Financial wellness is an incredibly important piece of our overall wellness. And let me be clear- financial wellness is not about being greedy or looking to get rich. Financial wellness is about being at peace with your finances, being able to provide for our families, living within our means, not allowing consumer debt to control our futures, being able to retire with dignity, and be generous givers. Most of us were not taught these concepts in school, and yet understanding principals of finance and how debt works are so important to our all-around wellness. When we learn and understand these skills, we can change our future and the generations that come after us.
If you want to learn more about achieving financial wellness for yourself and your family- things like healthy ratios and creating a zero-based budget- I would love to hear from you. I offer multiple resources from 1:1 online coaching sessions, financial wellness and budgeting courses, as well as numerous free resources to get you started. If you are a mama looking to find a way to come home to be with your babies, my heart is with you and I can help you make that happen.
Visit Thrive Life (itstimetothrive.us) to check out how we can help you on your way to changing your financial future- when we know better, we can do better.
