Many people are aware that they need regular exercise to keep fit physically. As such, they hit the gym, control their diet, walk, jog, or run, with the primary goal of staying healthy and enjoying a quality life. Just like you need regular exercise to keep fit, you also need financial fitness checkup for you to be on top of your money game and ensure that you are moving towards your overall financial goal.
All over the world, millions of people work hard to earn their money, but most do not have any financial fitness check that will ensure that they become the master of their money. They do not have any saving, investing, and spending plan, making it difficult for them to achieve their financial goals.
Just as it is essential to be physically healthy, it is also crucial to ensure that you have sound financial wellness. How can we achieve this? — By doing what we can to ensure that we are not spending more than we make, avoiding debt, and making our money work for us.
Here’s a look at some ways to achieve financial wellness:
1. Become a money manager.
You manage your physical shape by ensuring that you get regular exercise and eating the right food. In the same way, you can achieve financial wellness by learning how to manage your money the right way. You must be well aware of your income and all your expenses. You need to know the exact amount you spend on various categories of your expenses every month. Becoming active in managing your money will prevent you from wondering where your money went at the end of each month, it will help you to properly plan and allocate your income based on your priorities.
Becoming a money manager does not mean you should literally take a profession as a money manager in an investment firm, but it means becoming conscious of what you spend, how you spend, and how to save and invest so that your money will ultimately work for you. Budgeting will help you take control of your money and ensure you are spending your money in such a way that will help you achieve your financial goal. To learn more about how to properly allocate your income into various spending categories, check out my blog post “Command your money.”
All your expenses can be put into three major categories — Essentials (Must Have) includes feeding, housing, clothing, and paying your bills. Savings, this is what you need to put aside for the rainy day, it helps you to build wealth if adequately planned. Moment — this includes money used to create fun for yourself so that you can enjoy your hard work.
2. Avoid debt like a plaque
Debt is an obligation to the past which will rob you of potential opportunities in the future. By going into debt, you are making other people richer through the interest you pay on your debt. According to the federal reserve, the outstanding consumer debt exceeded the $4 trillion mark for the first time back in February 2019. This debt is setting a lot of people back in terms of how they can achieve their financial goals. To become financially fit, you need to avoid debt, or pay off all your debts if you are already in one.
Debt steals from your future, and to have a financially sound future, you need to get rid of such debt as credit card debts, auto loan, payday loan, or any form of consumer debts to reduce and eliminate the interest being charged against you every month. To help guide you, here are my simple step for beating that debt and building wealth:
a. Save a $1,000 for emergency
b. Pay off your debts
c. Build a 3-month reserve fund
d. Invest 15% of income
3. Right size your income
When someone that is planning to lose weight goes to the gym, if they are going to achieve results, then such person must know the amount of weight they plan to lose. The exercise routine will not be effective if this person just says, I am going to the gym, and I plan to lose weight. Consider another approach, I am going to the gym, I plan to lose 10 pounds of weight within two months by going to the gym.
In the same way, for you to achieve financial wellness, you must be able to know the income level that is right for you. For most people, when they are trying to accomplish any financial goal, the first thing they do is to cut back on their expenses, while this is okay to do, it is not always the best and most efficient approach. To right-size, your income means to determine the appropriate income that will help to attain and sustain your desired standard of living and also help fund a lifestyle that you want in retirement. For example, if you know that an income of $75,000 will be sufficient for you to live your life to your desired standard, if your current income is only $50,000, you will struggle to balance your budget, and plan for your future. To eliminate the struggle, you should consider changing your job so that you can earn more money and be able to live the kind of life you love. If on the other hand, your income level is $100,000, that is $25,000 above your sufficiency level, you will be able to quickly achieve your financial goals with careful planning.
You cannot achieve financial fitness by accident, you must have specific goals, and you must determine the income level that will help you to fulfill the goal.
4. Focus on your big goal.
When it comes to getting your finances in shape, you should endeavor to focus on the big goal. Just like when you get into the gym for exercise, if you have a goal to lose weight, to maintain a healthy weight, or build muscle, you will need to tailor your exercise routine in a way to achieve your fitness goal.
Similarly, when it comes to your finances, you should have a goal, and then on a month to month basis, plan your money in such a way that you are moving towards your big goal. For example, if your big goal is to buy a car, or save a down payment for your house, you should allocate your money so that it will be more impactful in areas that are most important to you. You may decide to put more money to make such areas priority when creating your monthly budget.
If you overspend on categories that are not important to you, you may not be able to have any money left to fulfill your most important desires. So, put your focus and priority on your big goals, take small steps every month, and you will be able to attain financial fitness.
5. Contentment is important
In the world where everyone wants to keep up with the Joneses’, it’s too easy to get carried away and try to be like everyone else. In the gym, if you aim to build muscle, you know you have to lift weights to achieve your goal. If you meet someone else in the gym, whose goal was to lose weight, and this person workout schedule is to use the treadmill and perform some aerobic exercise, if you decide to copy this person and start walking on the treadmill instead of lifting weights, you will fail at achieving your fitness goal.
Unfortunately, in terms of financial fitness, most people do not have goals, so they just blindly copy what others are doing. If your personal goal towards financial wellness is to get out of debt, by paying off your credit card, you will struggle financially, if you decide to buy a new car just because of a close friend just did.
You need contentment to achieve a life of financial wellness. Contentment is about setting your own goal, singing and dancing to your own tune, and not getting derailed by your next-door melodious rock and roll. It is about identifying what is most important to you and staying in your own lane. It is somewhat refreshing to see more and more millennials getting caught up to the frugality movement like such as FIRE (Financial Independence, Retire Early).
6. Influence what you can control — no excuse.
There are some few occasions when I go to the gym, and I will find some folks that are just there to create distractions. They came there for chitchat, they will not follow the simple gym rules and etiquette. They are always noisy, they will never put equipment away properly for the next user, they do not respect other people’s space, and they typically display all sorts of obnoxious character. I’m sure you have met people like these before, whether in the gym or in the pool. They are unnecessary distractions, and most of the time, you cannot control them.
Regarding your finances, there are also so many things that are outside of your immediate control — the taxes you pay, the prevailing interest rate, companies policies, and benefits program. The best way to live happily and achieve financial wholeness is to seek to influence only those things you can control. For example, you can control where you work, if you are not happy working with a particular company, you should have the courage to make the necessary change. If you have a government that is not implementing policies that are favorable to you, you should not just complain, you should vote and get more like-minded people to vote as well so that you can have people that represent your views elected in office.
7. Make your money your slave
When you go to the gym, you burn calories while expending your energy by using the gym equipment — running on the treadmill, lifting a weight, or even by just doing your press up. The more the energy you use, the more the calories you burn, and the healthier you get.
The reverse is the case when we consider financial fitness. Working longer hours or harder will not necessarily make you more money. The most hard-working people are not always the wealthiest people, but if you can learn how to work smarter and make your money work for you, then you will be able to put yourself in a position to earn more money without putting further effort. That is how the rich get richer.
This is the time to deploy the money that you have saved in step two to profitable investments that will continue to provide good returns to you year in year out, rain or shine so that you are making money whether you are sleeping, or you are awake. To join the elite club of the rich, you should also find ways to generate your passive income from multiple income streams. It is often said that an average wealthy person has more than 5 income streams. It is time to build your income streams. Check out my post on how to generate passive incomes.