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Exercise Your Financial Muscles to Get Financially Fit

Exercise Your Financial Muscles to Get Financially Fit

April 24, 2023

What is financial fitness? We are all familiar with the term physical fitness, and if pressed for a definition, we might define it in terms of our strength and health level. When it comes to an explanation of financial fitness, the same applies. Financial fitness can mean something different to everyone based on your current fitness level or stage in life.

There are many ways to get ahold of your finances; Below, we consider six principles that will help you get into financial shape at whatever starting point you find yourself.

1. Set goals. If you don't have defined short-term and long-term financial goals, reaching a higher level of financial health becomes much more challenging. Without an end goal, you are financially adrift, making it harder to create a plan.

2. Budget. Do you know what 'buckets' your spending lands in? How do you spend your income? You won't have a holistic picture if you aren't tracking expenditures. You might be surprised at how much you spend on eating out, on entertainment, and even on a daily habit of barista-prepared lattes.

Unnecessary spending can be diverted into savings or paying off debt. You will struggle to follow a plan that is too rigid. Trim frivolous spending but leave some room for fun and hobbies.

3. Live within your means. Your lifestyle shouldn't exceed your income. Excessive spending is not a path that leads to financial fitness. You want 'money at the end of the month,' not 'month at the end of your money.' A budget is your blueprint that helps achieve this goal.

4. Invest wisely. Among various factors, your short- and long-term financial goals will significantly influence the proper mix of investments. A diversified portfolio that crosses the spectrum can reduce risk and enhance your return over the long run. Accumulation of wealth over a more extended period is the goal.

5. Enjoy retirement. Many enter retirement after accumulating wealth over decades and learning how to save. Suddenly relying on that savings rather than earning income seems like a daunting leap for some. It doesn't have to be that way. While your risk tolerance (losing money) may change, creating a plan that allows you to enjoy your golden years more stress-free is the goal.

6. Protect your assets. Do you have life insurance, health insurance, and personal liability insurance? Do you have a will and estate plan? Who are your beneficiaries? What happens if you become disabled?

Do you have a trusted advisor to handle your affairs? Protecting yourself, your family, and your assets are foundational to being financially fit.

Every situation is unique. You may have mastered the fundamentals and only need to apply selectively highlighted principles, plugging small holes and shoring up your finances. Or a more aggressive approach might be in order. Focus on one theme at a time and build strength in that area before moving to the next. You are never alone on a financial fitness plan. We are always here to spot you.