Just a little more a month into the New Year, and many people are focused on physical fitness as part of their New Year’s resolutions. But what about financial fitness? The start of a new year is a great time to think about making more money, digging yourself out of debt and just getting your financial house in order.
Financial fitness starts by asking yourself some key questions and giving some honest answers, even if that makes you feel a bit uncomfortable. The same way no one likes to admit they need to firm up or lose some weight, no one likes to admit they have financial deficiencies. But just like physical fitness, the first step to being financially fit is recognizing there is a problem.
Ask yourself these key questions:
• Are you living paycheck-to-paycheck? And are the days right before pay day ridiculously tight?
• Are unexpected expenses paid by a credit card or a family loan? And speaking of which, how is that credit card balance looking?
• Are dreams of an exotic vacation, college or a new car really just a hopeless fantasy?
• Are you still saying “someday” to the idea of retirement planning?
Saying yes to any of these questions is a pretty good sign that it’s time to commit to getting into better financial shape. And just like physical fitness, it’s never too late to start. The first step is always recognizing the need for change before you can craft a strategy.
A good financial strategy should be done on a case-by-case basis, since everyone’s goals are different; however, there are some commonalities that we can all follow on the road to financial fitness.
Understand why you want to be “financially fit”
Your why is unique to you and will be different from your brother, best friend or co-worker. Whether it’s to save your marriage, live well after retirement, send your kids to college or finally have financial freedom, make sure you know what motivates you, not anyone else. It’s a lot easier to become financially successful when you’re working towards your own goals and dreamss.
Establish your “financial workout routine”
Just as most people usually have a physical fitness routine, you must have a financial workout routine. Evaluating your spending habits, keeping tabs on your credit score every month, and lowering unnecessary debt will help whip you into financial shape. Many people skip these essential steps, but just as you wouldn’t run a marathon without proper training, you can’t expect to get financially fit without covering the basics.
Identify your workout buddies
A workout buddy helps to hold you accountable, and a financial buddy will help to keep you in good financial shape. Solicit advice from a financial services representative or supportive family and friends who are already financially fit, write down your financial goals and ask them to hold you accountable to these goals. A lack of accountability leads to erratic behavior and falling back on old negative habits that got you into trouble in the first place.
Push yourself for growth
This is a decision you have to make for yourself. Just as nobody else can force you into physical fitness, you are the only one who can decide to get financially fit. Overcome the challenge of being comfortable with a bad diet (no savings and/or poor spending habits) and create a habit of financial discipline. If you don’t get enough cardio (earning potential), seek ways to generate additional income.
Dangle the carrot. Set a goal for yourself and when you reach it, give yourself that carrot. If your downfall is spending, for example, allocate a small amount of money to treat yourself to something nice once you have reached a specific financial goal.
Set measurable goals
Just like physical fitness, a financial fitness program should be seen as a long-term strategy for life, not something you do for a few months and then give up on. Set small goals or benchmarks to track your progress, and don’t don’t get overwhelmed by the big picture or you’ll become easily overwhelmed. Start by identifying where you want to be in six months, for example. Maybe it’s paying off $5,000 in credit card debt, or maybe it’s putting $5,000 into a savings account.
No matter what your reasons for getting financially fit, one thing is for sure: You will appreciate the reduction in stress and headaches that come with money troubles. The best way to describe financial fitness is freedom, and with a good strategy, some discipline and hard work, anyone can become financially fit and experience the freedom of not having to constantly worry about money, and doing what you want to do when you want to do it.
Patrick Bet-David is an entrepreneur, author and self-made success who emigrated from war-torn Iran to the U.S. and has made financial literacy his personal crusade. He is the founder and CEO of People Helping People (PHP),