Are you pretty sure you’re financially fit? Or are you thinking something could be improved? Sometimes, it’s hard to know just what “financially fit” means to begin with. Here is some information to help you determine where your family is on financial fitness.
It’s Called “Financial Fitness” for a Reason
Financial fitness is analogous to physical fitness. Like being physically fit, financial fitness requires discipline and awareness of any problems. It means you have a handle on your spending, and you know how much money you have available to spend.
When you are getting physically fit, you often need to count calories and cut back if you’re going over your allotted intake; with financial fitness, money is the equivalent of calories. Sometimes you can indulge, and other times you need to cut back.
How Do You Know If You’re Fit?
Here are some questions to ask yourself to test and see if your family is financially fit. The “financially fit” – FF – answer is in parenthesis after each question.
* Do my partner and I discuss our finances regularly? (FF: yes)
* Are my/our bills paid on time each month? (FF: yes)
* Is there any outstanding debt, particularly credit card debt? (FF: no)
* Are we putting aside any money into a savings account? (FF: yes)
* Are we planning for our retirement? (FF: yes)
* Are we making no more than minimum payments on any debt we have, mortgage included? (FF: no)
* Is there a savings account for an emergency or in case of unemployment? (FF: yes)
How did you do? If you find yourself coming up short in the financial fitness realm, here are some things you can do to get your finances in shape.
Getting Fit: Financial Exercise Program
Here are some tips for a financial workout to get things in better shape.
# Savings – Get at least two savings accounts set up if you don’t have them. The first should be a “liquid” account that you can dip into in emergencies. The other should be for retirement, and might be something like a 401K or IRA that will earn interest.
# Professional help – There’s nothing wrong with seeing a financial advisor to get a handle on the options that are available and appropriate for your individual family.
# Pay off credit cards – Each month, pay off your balances in full. If you can’t, then stop using that credit card until it is paid off. Call your credit card company if necessary, and let them know you are trying to pay off your balance. Ask if they will reduce your interest rate, or if they have any other helpful advice for getting the balance paid down.
# Establish credit card rules – In addition to the pay-it-off-every-month rule, create a budget that shows you exactly how much you can put on your credit card each month and still be able to pay it off in full. In your budget, allow a certain amount for credit card spending – say, for online purchases – and do not go over that amount. It may be $24 or $225. Everyone is different. Just stick with what works for your financial situation.
# Create a budget – While you’re working on the credit card situation, you’ll be creating a budget. This is an essential step toward financial fitness; it’s like stepping on the scale to get your weight before beginning a diet and exercise plan. Like a scale, a budget shows you numbers – what you have, where you can make changes, and basically how you can take control and get fit.