Financially fit is the secret to success. However, it’s not always easy to become financially fit. Money is such an individual thing, and it is sometimes hard to manage, but it is an essential goal to plan for financial stability and make important financial decisions.
How do you know if you are financially fit, and how do you get on it if your situation is not ideal? Let’s discuss the financial fitness meaning, the signals that you are financially fit, and what to do if you are not!
What does it mean to be financially fit?
Financial fitness is subjective, but most of us would agree that losing financial pressure is a great way to start. But being financially fit involves having a healthy finances!
For example, you save money by budgeting, spending, investing, and learning on personal finance topics.
If you ask 100 women what they think the meaning of financial fitness is to them, you may get 100 different answers. Some may focus on debt, while others wish to send their kids to university.
Lots of women may only be hoping to stop living paycheck to paycheck. With that in mind, let’s look at signs that your finances are in good condition and what to do if you would like to improve them.
6 Ways to ensure you are financially fit: Plus tips on how to whip your finances into shape!
So, are you financially fit? Check out our list to make sure you are financially fit and what to do if you need to improve your situation a bit so you can become financially fit for life!
1. You are committed to improving your finances
Taking advantage of every opportunity to save money is a sign of being financially fit. Your finances are constantly in flux, so it is important to be adaptable.
You do this so you know things like monitor your spending, track your budget, and know where you stand with your net worth.
It is essential to have a firm grasp of all of your finances if you want to be financially fit. Here are a few tips for doing so if you aren’t as physically fit as you’d like to be.
Budgeting is the key to achieving financial fitness for life. Even for someone making $100,000 or more a year, budgeting is a vital part of financial fitness. Some individuals do not benefit from a to-the-penny budgeting system, but some type of budget is an excellent way to become financially savvy.
In essence, budgeting is the act of dividing your income and expenses. In its simplest form, you should allocate your income so that you can meet all of your monthly expenses.
Budgeting is absolutely essential when it comes to financial fitness. Since you don’t have a firm grasp of your income and expenses, you might overspend. Knowing how much money you make and spend prevents you from wasting what you gain.
These budget categories and payment methods provide an overview of the costs involved.
The 80/20 rule is one of the easiest percentage budgets to follow. This is when you use 80% of your income for needs and want, then save the other 20%. Rather than having a variety of categories, you split your bills and savings into two buckets.
With the 70-20-10 budgeting strategy, you spend 70% of your income and needs, save 20%, and 10% for gift-giving. If you have debt, you can use the 10% for gift-giving and allocate it toward your debt payoff plan.
The 30-30-30-10 Budget is another popular method you might try. This budget breaks down into 30% housing, 30% expenses, 30% savings and debt, and 10% for entertainment and pleasure.
Determine the best budget technique for your situation and begin saving!
While the term “net worth” may be intimidating if you are just starting out in your financial career, it is a handy figure to know.
net worth is not the same as income. The easiest way to measure it is by subtracting your liabilities from your assets. In other words, what you have without what you owe.
As you calculate your net worth, add up all your property and other assets that have an economic value. Your checking and savings accounts, IRAs, real estate, bonds, and other investments should all be included.
The remainder of net worth is comprised of liabilities or debts. Anything you owe money on goes into this remaining number. Credit cards, car loans, personal loans, and mortgages fall under the category of debt.
When you know the numbers of your assets and liabilities (debts), subtract the liabilities from the assets. Your net worth is just a number to be aware of as you set financial goals.
2. You set financial goals
Do you make weekly, monthly, and annual goals for your finances? If you constantly set financial goals for your money, it’s a sign that you’re financially fit! Your finances change frequently, and it’s healthy to revisit your goals and modify them regularly.
Don’t worry if you have not established your goals yet; here is what you can do to start.
A financially successful individual knows what is most important to her. She has no problem focusing on multiple aspects of her finances simultaneously.
Determining where you stand in your financial journey can help you prioritize what you should do next. For example, if you’re still paying off student loans, you might have to hold off on buying a house. If you live in a paid-for house, you may be interested in maximizing your retirement savings.
It’s essential to learn what your financial priorities are in order to effectively tackle problems and challenges. And that doesn’t mean you only focus on debt, college savings, or 401(k)s; you know where most of your energy (and money) goes.
Once you’ve determined your goals, (maybe ranking them in order), you can create effective goals. You may want to pay off your car loan, then put the amount you’re paying towards a down payment on that.
It won’t be simple to set the ideal goals for your wealth, but you can set your life in order financially by breaking your goals down into sensible steps. That’s why it’s crucial to break your financial goals down into manageable components.
Whether you use these plans to a “T,” you can gain wisdom by practicing a budgeting system. The key is to set reasonable goals for the stage of life experience you are living.
Financial goals give you something to aim for so that years from now, you will be further along than you are right now. Your goals may include saving more money or becoming financially independent by the time you’re a certain age.
3. You have a plan to get your debt under control
Ah, yes, the “D” word: debt. It’s a four-letter word for many people, and it’s appropriate to describe something as very bad to avoid. When debt is a necessary tool to optimize your finances, you should avoid accumulating too much cash on hand.
Those who have recently had financial troubles may be able to pay off their house but still have credit card debt left over. Here are a few ways to get out of debt if you have more credit than you should.
Yes, we already did so in the net worth calculation section. But it’s important enough to repeat! Ignoring your debt won’t make it disappear. Burying your head in the sand and ignoring the debt won’t accomplish anything.
You must know exactly how much you are borrowing across different categories, such as student loans, mortgages, car loans, and medical debt, credit card debt, and so on. Not knowing the total cost could add to your debt stress.
Understanding how you spend your money enables you to create a financial plan. Yes, it can be challenging to think about the total at the beginning. Once you know how much money you have, you can determine how to pay it off.
Many financial experts focus on debt payoff because it is important to reaching important milestones, changing careers, and preparing for the future. Debt can prevent you from becoming successful, limit your career options, and prevent you from adequately preparing for the future.
Once you know how much your debt is, choose a debt payment plan. If itâ€™s super-overwhelming, you may want to seek debt counseling or budget counseling. You may be able to easily craft your reimbursement reduction strategy by doing some easy research.
You could choose from the debt snowball or a debt avalanche, where you pay the smallest debts first. Alternatively, you could employ a debt avalanche, where you select based on interest rates. Whatever debt relief strategy you choose, just make sure it is easy for you to follow, so you can become debt-free!
4. You are saving money
If you have a sizable emergency reserve and disposable income, that indicates your funds are in good shape. Treasure isn’t always simple to save, but we have to do so. Financial health is your bottom line, and you cannot become successful without saving money to some extent.
However, even a little is better than nothing. So, even if you save a little from every paycheck, that is also great! If you are not saving or want to save more, here are some suggestions to help you.
Please, whatever you do, if you don’t have any emergency medical funds saved up, that should be your top priority. Currently. Save as much as you can right away and get yourself a starting emergency savings fund of $500 or $1,000.
If you’re not able to save anything, you’re not alone. After all, a recent poll found that 56% of Americans couldn’t cover a sudden $1,000 expense. This is disturbing news, but remain optimistic.
To begin, work on saving anything you can, even if it’s just $5 a month. Think of any expense you can eliminate, even temporarily, as you build up an emergency account. This prevents you from going into debt if an emergency arises.
Another component of the overall cost savings, once you have an emergency fund prepared, could be sinking savings. These are just savings that you reserve for future costs.
Oftentimes, sinking funds pay for expenses that happen just once, or occasionally. Maybe it’s for a wedding, a school trip for your daughter, or a vacation.
You can create separate sinking funds for as many categories as you like. Some of these might be a car sinking fund, a furniture sinking fund, and a holiday/birthday present sinking fund.
This donation is not as important as your emergency fund. But if you do this, it can help ease some of the strain at certain times of the year.
5. You are investing your money
Are you making your money work for you? Are you investing for your retirement? Do you contribute to a 401k or IRA? Then you are most definitely financially fit! If you aren’t investing, here are some ways to begin!
One of the best ways to spend money is with an IRA (Individual Retirement Arrangement). Of course, these are terrific for saving, since you don’t need to have a certain kind of employer to set them up. Among the many tax advantages to owning an IRA, however, is that you do not need to include employer information in them in order to receive tax benefits.
A conventional IRA is an IRA from which contributions are tax-deductible (they lower your taxable income), while a Roth IRA often works better because contributions are not tax-deductible, however you may never pay taxes when you withdraw the money.
If you have leftover money after paying the bills and paying down debt, you could try to max out your IRA each year. That money will enable you to be prepared to retire in the not-too-distant future.
Another form of investing is with employer-sponsored retirement accounts, such as a 401(k) or 403(b). These accounts are more flexible than IRAs in some aspects, and the annual contribution limit is higher.
Yet despite maxing out a 401(k) plan may require a higher salary, it is a great investment if you can manage it. That money grows over the next few decades and brings you tax breaks.
The 401(k) is especially impressive if you work for an employer that offers an employer-matched 401(k) plan. The plan matches your contribution up to a certain limit, such as 3%, so it’s free money to you!
You can learn more about the differences between IRAs and 401(k)s. Both have pros and cons, and you can save in both types of accounts if you have the funds.
6. You continue to learn about personal finance
Here’s a final wealth tip that can help you remain wealthy. You won’t stop learning about finance. Knowing does not end, it is a lifelong process. This applies to your career, your relationships, your health, and your finances.
If you are always keeping up with the latest finance books or are closely following financial pundits on YouTube, this indicates that you are staying informed about all things money.
Throughout every step of your financial life, you change and adapt. It is a positive thing to grow and change.
When trying to become financially fit, don’t aim to be “finished” once you reach a particular goal. While it’s an admirable goal to become debt free, buy a house, or save half of your income, the work isn’t finished.
Financial fitness means you are willing to learn, and you continue to learn new skills. You may feel really great about your finances and decide to teach a class on budgeting. That will suggest a new approach to money.
Keep learning new information and new skills. While some financial regulations may remain the same, there is always something to learn. Nevertheless, the stock market fluctuates, the economy fluctuates, the job market fluctuates, and more.
In addition, in your daily life, your finances will not stay the same. So read financial books, listen to podcasts, and read about personal finance and investing to stay up-to-date on your money game! Don’t forget to look at our free courses and worksheets, as well!
Adjust your financial plans regularly to become financially fit for life!
It may sound easy, and it is. You should be financially fit by constantly evaluating your cash flow and adjusting it as necessary.
You could be in a phase of life when you don’t go out to eat much, and you won’t spend much money on luxuries. But at other points, you can afford to splurge more often or give more generously to charity.
A financially independent person doesn’t accept the status quo, no matter how successful she is. Even the wealthiest of us can benefit from assessing our finances from time to time.
While you may not be able to check off every item on this list, you can still aim to reach your financial goals. Personal finance is complex but fulfilling, and you have the tools and skills to grow your financial well-being in steady increments.
Keep learning financially, adjust your budget as you learn new things, and never lose track of your financial independence.