The Financial Health KPI: A Practical Guide to Thrive, Not Just Survive

Why Financial Health Matters

No matter where you are in life, it's safe to say that money is a necessity. I don't make habit of quoting Kanye West, but even a broken clock is right at least twice! In his hit song Good Life he has a bar that I have always thought to be profound:

"Having money’s not everything; not having it is." 

This line perfectly captures the reality of finances is today's world: money may not buy happiness, but the lack of it can create real hardship. Financial Health isn’t about riches and fame—it’s about taking control of the factors that drive your financial well-being. These include:

• Having a healthy relationship with money

• Gaining exposure and providing value

• Budgeting

• Saving and investing

We cannot control every aspect of life but these four are well within control for just about all of us.

1. Building a Healthy Relationship With Money

A healthy relationship with anything—whether it’s a person, job, or object—is based on positive interaction, growth, and self-preservation. The same applies to money.

Money is a utility—a tool we use to meet our needs and desires. Most people don’t want money just to have it; they want it to achieve something: a house, travel, freedom, security. Think about. No one says "I just want money". It's normally followed by a "so what". So they can buy something or go somewhere or reach a level of comfort. Understanding this helps reframe our mindset and keeps us from falling into the trap of emotional spending or financial anxiety.

A healthy relationship with money keeps you inspired to earn it, appreciate it, and use it wisely.

2. Exposure + Value = Money

Earning money comes down to a simple formula:

In our world today we have so many opportunities to earn money yet so many have trouble coming up with ways to take advantage of these opportunities. This is where exposure and value come in. You need exposure to opportunities and the development of valuable skills to earn money. Doing this is easier than we make it, too. We can read books, attend conferences, and take courses to learn skills just to name a few avenues. The more you learn, the more opportunities you see—and the more value you can offer.

When you possess valuable skills and consistently show up where value is needed, you create endless opportunities to generate income.

3. Budgeting: Tell Your Money Where to Go

Now it's not enough to just make money. Budgeting is a cornerstone of our Financial Health KPI. In its simplest form:

It’s the act of telling your money where to go instead of wondering where it went. Here’s the simple run down of how to do this:

1. List all expected income and required expenses (e.g., rent, bills, groceries) at the top of the month in a spreadsheet or using an app like Mint or EveryDollar

2. Track these values on a weekly basis to be proactive

3. Adjust to ensure you stay within your means

4. By all means, stay disciplined enough to stick to your numbers.

I underlined "required" and "stay within your means" because this is where most people fail and why, according to data, nearly 60% of Americans live paycheck to paycheck and U.S. household debt exceeds $17 trillion! Too often we emotionally spend money on unnecessary things or spend beyond our means to "keep up with the Joneses". This sets so many up for failure in the long run because it puts us in a position where we have spent more money than we actually bring in. Budgeting helps reduce financial stress and gives you control over your finances. By prioritizing budgeting you don’t have to be part of those stats and you can put yourself on a path to sustainable Financial Health.

4. Saving: Your Safety Net

I live by this mantra: Save your money, because it will save you.

According to Bankrate, 56% of Americans can’t cover a $1,000 emergency. That’s a heartbreaking statistic because life has a way of happening such that when it rains it tends to pour sometimes. Not having money saved is a recipe for stress and disaster. Without savings you putting yourself at high risk of financial insecurity.

Now this may sound aggressive but my strong opinion is that a healthy savings goal is to have six months of living expenses saved. Don't shoot the messenger here. If you have to eat ramen and PB&J or pick up a second source of income I would highly suggest doing everything you can (legally, of course) to earn yourself the freedom of knowing that you have six months of living expenses at your dispense at any given time. This gives you freedom, confidence, and the ability to weather unexpected costs like car repairs, medical emergencies, or job loss. The inexplainable feeling you gain knowing that you are this financially secure is one that I believe everyone deserves and once you feel it you will never deprive yourself of the feeling again!

5. Investing: Make Your Money Work for You

I separated investing from savings because this is a one-two punch that I think should follow a specific sequence because investing can be risky. Once you’ve built up savings, though, the next step to ensure you have a strong Financial Health KPI is to invest! The world renowned genius, Albert Einstein, once described compound interest as "the eighth wonder of the world." It's this wonder that makes investing such a critical thing to do with your money as investing, by definition, means that you are putting your money in a position to not just grow but compound!

The Power of Compounding

Let’s say you invest $10,000 in a vehicle like a stock that grows at a 9% annual rate of return. After 20 years, that turns into about $56,000—without doing anything but letting it sit. That's a huge gain considering all you do is set it and forget it! Investing is not just critical because of the growth potential, though. It's actually imperative due to its annoying arch nemesis—inflation (you may heard about him...)

The Pain of Inflation

Inflation is the rate at which the general price of goods rises. As a practical example, ask your grandparents or any elder how much a gallong of milk costed when they were 20 or how much a Big Mac costed in the early 90s. Today inflation is at 3% so if it stays at 3%, that same $10,000 will be worth only about $5,500 in 20 years! What this means is that by not investing your money you are actually losing the value of it over time! That’s why investing isn’t just smart—it’s essential.

Final Thoughts: Thriving, Not Just Surviving

Again, Financial Health is not about riches, it's about enabling yourself to live a successful and fulfilled life. By controlling these 5 aspects of your financial health that I have just discussed, you are putting yourself in a position to do just that! No matter where you are in your financial health right now you can still improve your Financial Health KPI by focusing on your relationship with money, your ability to make it, and your ability budget, save, and invest it. Having a strong Financial Health KPI is not hard but it does take devotion and the sooner you start, the better you will be in the long run.