How to Achieve Financial Fitness

Financial wellness

posted November 10, 2020 in Blogs

As we approach the end of the year, we often times reflect on the last year and make note of our accomplishments, missteps, new year’s resolutions we let fall through the cracks, and this year more than ever, the shear craziness the last year has brought. Many things have been out of our control this year, but one thing we do have control over is our level of financial fitness. Several have seen hardship this year, making this a great year to take a step back and be thankful for all  you have and learn how to protect it for years to come.

Just because your bank account can’t do squats, doesn’t mean you shouldn’t take it to the ‘gym’ every once in a while to see how good of shape it’s in. Being financially fit means living a life of complete financial responsibility and independence. The Center for Financial Services Innovation (CFSI), also known as the Financial Health Network, defines four basic components of financial health: Spend, Save, Borrow and Plan, which can categorize all daily financial activities. In short, every choice or purchase you make in terms of these four categories either builds or detracts from your financial fitness. And just like physical fitness, you can bulk up your muscles a little more each day!

Overall, being financially fit is crucial for a well-balanced and stress-free life. Here’s some simple reasons how and why you should strive for this lifestyle:

Expand your financial knowledge

A financially fit individual is constantly broadening their knowledge of the industry. You may read personal finance books and blogs, attend financial education seminars and are aware of the ever evolving state of the economy. This enables you to make decisions from a position of knowledge and power, leaving much less up to chance or luck.

Stick to a budget

Tracking monthly expenses is key to financial health. A well-versed financially fit person is careful to set aside money from their monthly income for necessary fixed and discretionary expenses and stays within budget for each spending category. If budgeting is new to you, know there are endless options on the market to help; most being free and very accessible in a variety of formats.

Minimize debt

A financially fit person is also committed to paying down debts and seeks to live debt-free. Constant budgeting, ongoing financial education and planning ahead will enable you to make it through the month, and through unexpected expenses, without spiraling into debt.

Maximize savings

Prioritize your savings account. Prioritize. Prioritize. Prioritize. One more time for the people in the back, prioritize your savings account! In fact, savings should be a fixed item on your monthly budget instead of something that only happens if there is money left over. Budgeting in this way allows you to think ahead and build a comfortable nest egg or emergency fund for unexpected things that pop up. Also, having a robust financial safety net means sleeping better at night knowing there’s money available to cover unexpected expenses or a change in life circumstances.

Maintain complete awareness of the state of your finances

Knowing exactly how much money you owe, the accumulated value of your assets and the sum of your fixed and fluctuating expenses is also a key factor in becoming and maintaining your financial fitness. Having this awareness has the ability to remove a large part of the stress money management can bring, and allows you to make better financial choices.

Maintain a healthy credit score

Excellent credit history and current credit score is a crucial component to long-term financial health. To become financially fit in this area includes being careful to pay all bills on time, holding onto credit cards for reasonable amount of time and keeping credit usage low. This enables you to qualify for long-term loans with much more favorable interest rates, which saves you money for years and years to come.

Help your money go further

While credit cards can be helpful in times of need, having fit finances means not wasting large sums of money on interest charges for purchases made using borrowed funds such as credit cards or loans. Just because retailers offer financing options, doesn’t always mean it’s in your best interest to move forward with that option. Doing your research, saving for large expenses, living within your means and only using those types of resources for purchases you can actually afford, or for large, long-term assets, like a car or house will help your financial fitness and future greatly. This allows you to have more funds at your disposal to help build wealth through savings and investments.

Create concrete financial goals

A financially fit person has long-term and short-term financial goals. This enables you to keep your focus on the big picture when making everyday money choices, and empowers you to actually realize your financial dreams. Many budgeting tools also offer options to input your financial goals to keep them top of mind and not lose sight of ambitions. Similarly to going on a diet and tracking your eating habits to reach a goal, tracking your spending as it pertains to your goals can lead to overspending realizations and allows you to make any necessary adjustments.

Achieve financial independence

Financial independence can mean a variety of things to different people, but in short means not relying on loans from friends or family members to get by, while also not needing to pay with borrowed funds at the end of the month because you ran out of money. Your well-padded emergency fund means you don’t depend on your monthly income to put food on the table or gas in the tank. While this may seem impossible for some at the moment; by sticking to a budget, prioritizing savings and maintaining an awareness of your finances, you will be on your way to a strong, secure and independent financial lifestyle. It may take a long length of time to get to reach this level of security, but don’t be discouraged, every positive decision you make makes an impact.

Being financially fit enables you to live a life without battling the fear of not getting through the month or stressing about the future. Everyone can achieve financial fitness by committing to making choices in each of the four components of financial health (spend, save, borrow, plan) that push you to be forward-thinking to help build all around financial wellness.

If you’re not sure where to start, know Greater Iowa is on your side and ready to help you get on the right financial foot. Call or stop in your local branch today and let us help you reach financial fitness!

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