Amidst lockdowns, everyone is exercising more to meet the fitness goals they’ve been putting aside. It’s equally important now more than ever to think about exercising the same control over your money. Getting financially fit is much like training for a marathon. You’ll need the same practice and discipline to get to that finish line. That could mean clearing all your debt or retiring early. It’s always worth it to flex your creative juices for a sound financial future. Learn solid strategies on how to work out your money now.
What Financial Fitness Looks Like
A person with good financial standing, like a person in great shape, rarely gets tumbled over by life’s setbacks. Just as a healthy person gets to do everything he wants with more stamina and less difficulty, financially secure people are more likely to live more adventurously or pursue more worthwhile goals. They never have to worry about making rent or how to make it through a sudden medical emergency. These people are forward-looking and usually have less stress about what will happen a few years down the line.
If you’ve been working out to get leaner or avoid the possibility of disease, you’d probably be eating right or enroll in a gym. Financially smart people also want to build their financial muscle by following sound financial advice and are disciplined enough to follow through on their goals. They repeatedly make the same moneywise decisions just as a person would rotate and schedule a leg, arm, or ab day.
Being financially fit also means you know what to build and what to stay away from. Just as a person would do an effective workout to build more muscle – a finance whiz would want to build his assets and savings. They stay away from bad spending habits, just as a bodybuilder would avoid eating junk food.
Following the 50/30/20 Rule to Deal With Your Money
Financial experts advise a set rule for splitting costs just as you would carefully calculate your carb intake after every workout. The 50/30/20 rule states that you should:
– spend 50% of your net income on needs
– use 30% on wants
– save the remaining 20%
Effective Money Management Exercises for Bigger Gains
No pain, no gain. This also happens when you start on your journey towards better financial control. This starts with being honest about your current situation so that you’ll know what to do next:
1. Do a budget review
Just as your overall weight would depend on your calorie intake from different sources like carbs, fat, or protein, tracking expenses set your budget. Working towards an ideal budget can help you cut down on unnecessary expenses, much like an ideal weight. Cutting the fat means you have bigger allowances for the real priorities. Take note where you over and underspend.
Also, factor in additional income or any windfall that happens from time to time. A bonus, tax refund, or even an inheritance is much like a cheat day. But unlike that day, you don’t need to gorge yourself on more expenses. You can work off a cheat day, but once money is lost, it’s lost forever.
2. Verify your current credit
A study says that 4 out of 10 Americans do not know their credit scores. You can review your credit report at vetted credit bureaus to see where you stand. Check if everything on your report is accurate – any unknown item could be a sign of identity theft.
Make sure that you have an accurate picture of your current credit, just in case you need to apply for a loan or credit in the future.
3. Save until it hurts
Nobody likes the soreness that comes with training hard, but the gains are always worth it. Saving is the same way. You’ll always need to make painful choices between enjoying something now or being more comfortable in the future. But don’t be discouraged. You can start with baby steps like putting away even as little as $100 a month. Work that saving muscle to bigger and bigger amounts that you can handle so that your dream house or car gets within reach.
Remember that anything you spend should go towards helping to increase your income. Don’t skimp on expenses that could affect your health, living situation, or getting work done. Since you have a 30% net income window for wants, evaluate what will be worthwhile in the long run.
All that work will be for nothing if you don’t set bucket list financial goals. Set your financial fitness for life by advancing your 401k and IRA and investing in property or stocks. Being more financially literate is key to a more bulked-up financial future.