There are many smart, savvy women (and men!) in the world who are great at what they ‘do’, whether it’s running the family household, or being experts in their field or running their own business. They often have one thing in common, they are not financially fit.
What is financial fitness?
Financial fitness is about having a harmonious relationship with money; taking control of your money; saving adequate amounts to fund your dreams, eliminating your debt. It is about ensuring that you align the financial choices that you make with your core values and goals.
Financial fitness is like any other form of fitness, in that it does not matter what shape you are in, stepping up and recognising that you need to learn is a fabulous start. Remember: You can have excuses or results, not both!
Get Your Head In The Game
You will have probably heard about the concept of money-mindset. There’s a reason it has become such a hot topic, and that’s because money management has a substantial physiological component. Your beliefs around money and your attitudes to it, affect how you manage it.
Because mindset is so crucial if you want to improve your financial fitness, examining how you think about money is crucial before moving on to the more practical elements. If you don’t improve your view of money and financial matters, then you are just going to end up back in the same position you currently want to improve upon, or worse still, you might not even be able to move forward, as your limiting beliefs keep you stuck.
Having a clear vision helps you make those important financial decisions, whether it’s paying down your debt or how much to save for the future. Your financial vision is the roadmap that aligns your big life goals with your spending, savings, and earnings. This vision will help you define your goals and help you figure out a plan of action. And, if you prepare it correctly, then it also does something else – it will inspire you to make your dreams a reality.
Where Are You Now?
Before you begin to look at the practicalities of sorting out your finances, you need to get a firm grip on where are you now, in financial terms. Information is key here. The more you can understand your current financial situation, the more you will be able to take control over it.
Think of this as if you were preparing a CV. Instead of your qualifications and experience, you are going to be looking at your financial data. The key areas that you need to understand are:
Current Money Allocation
To become financially fit, you need to be able to resist the pressure and learn how to spend in a way that gives you the quality of life that you deserve and can afford without damaging your financial future. Examining how you have been spending your money will give you important clues here. Taking your last three bank and credit card statements and analysing what you spent your money will give you a good indication of where your money is currently being allocated.
It is essential to set yourself goals. You probably carry out a goal-setting activity every January and call them ‘resolutions’. The problem with such resolutions and the main reason they are often soon forgotten about is that they are linked to no plan of action, they are no more than simple wishes. That might seem a little unfair but for most of us its true.
Setting goals and an action plan to meet them is where you are going to change your financial dreams into reality. It is the planning, not the hoping, that will make things happen.
Create A Budget
Being financially fit involves knowing where your money should be allocated each month. You don’t need to be a financial whiz to prepare a budget, and you don’t need complicated spreadsheets. You can simply take the list of items from your money allocation review, and write down next to each heading the amount you plan to spend each month. Sometimes this process forces you to recognise that you may need to make some significant changes. The key is to make sure that you have all the major items of expenditure covered; you have your goals and vision in mind and your spending helps you work towards these; plus you are living within your means.
If you are in debt, it is like carrying around a huge ball and chain around with you wherever you go. You need to get rid of it as quickly as you can so that you have peace of mind and can pursue the things that matter to you. The shops can wait.
Use your budget to work out the maximum amount you can spend on your debt, and then divide it out between all the credit card and loans you have. Remember to make sure that you meet all the minimum payment requirements!
Protect Your Future
Tomorrow does happen and you need to be ready for it, from having an emergency fund to saving for your retirement. Creating an emergency fund is a priority if you don’t already have any savings.
Money Game Plan
Once you have examined all the areas needed to improve your financial fitness, it’s the time to put this information into a game plan for your money. A plan written down will help you keep focused.