What is Financial Fitness?

Dustin Hall |
Categories
Financial Planning

What is financial fitness? Financial fitness encompasses the skills, knowledge, and tools that enable you to make sound financial decisions.

It’s not only about wealth or just investing. Enhancing your financial fitness provides you with valuable insights, boosts your knowledge of financial matters, and empowers you to make informed decisions regarding your finances.

That is, a financially fit individual possesses a solid understanding of their finances, which provides the confidence and knowledge needed to manage basic money matters.

Benefits include:

  • Effective management of money
  • Effective creation and adherence to financial guardrails (a budget)
  • Effective debt management
  • Aid in the ability to achieve your financial goals
  • Fewer concerns about money and financial anxieties
  • Increase in ethical decision-making when selecting insurance, loans, investments, and credit card usage

Six Habits of Financially Fit People

1. Set financial goals. These are the targets you have set your sights on. They are not your neighbors’ goals. They are not your best friend’s goals. They are yours.

What are your short-term goals and long-term goals?

If you are married, it’s important that you set goals with your spouse.

Choose goals that motivate you, encourage you, and give you a sense of purpose as you achieve them. While goals can and should be challenging, they aren’t pie in the sky. Don’t shoot for the stars and settle for the moon. You’re more likely to get discouraged and give up.

Your goals should be SMART—Specific, Measurable, Attainable, Relevant/Rewarding, and Time-specific.

2. What are your financial values? These are the principles that guide your finances and help you define your goals. Create a list of what’s important to you. How does this align with your spouse or partner? What commonalities do you share?

More importantly, do your financial outlays line up with your financial values? A quick review of someone’s checkbook, Visa statement, or financial spreadsheet will quickly reveal what’s important to them.

3. Create and adhere to a spending plan. This is your budget. It must be realistic and include a savings plan. Build up an emergency reserve if you don’t already have one. You can even create savings “buckets” for items such as vacations and emergency repairs.

4. It’s not simply enough to have a spending plan. Keep track of your expenditures and stay organized. You can create a tracking system on a spreadsheet, a budgeting app, or even a spiral notebook. Keeping track of your expenses and comparing them to your budget will help maintain discipline and ensure you stay on course toward your goals.

You might be surprised at how much you spend on incidentals, which can help you cut back on unnecessary outlays.

5. Financially fit people live within and below their means. Do you want money at the end of your month or month at the end of your money?

Those who are financially fit have prepared for the unexpected and have reserves that help cushion unforeseen financial blows.

6. The financially fit create and commit to a financial plan. A financial plan serves as a roadmap, guiding you from your present situation to your financial destination, defined by your long-term financial goals.

The plan outlines both short-term and long-term goals. It is tailored to your specific situation and incorporates strategies that assist you in reaching your objectives.

We are here to support you. With your feedback, we help develop and track the progress toward your financial goals. Further, your plan is not set in stone, and adjustments should be made based on changing circumstances in your life.

Like physical fitness, financial fitness requires discipline and patience. It isn’t a one-time effort. However, embracing the principles of financial fitness will yield a lifetime of dividends.