Every fitness plan begins with a goal.
In the beginning, it’s composed of tiny steps. Get in 30 minutes of exercise three times a week. Then it grows. Hit the gym Monday thru Friday, use the weekend to rest. And grows. Run a marathon.
The same steps are important for a financial plan. You can’t run a marathon after your first month of exercise. You shouldn’t expect to change your financial situation overnight.
Here are some simple tips for starting your journey to financial fitness and building a healthy financial life.
Tip #1: Start with SMART Goals
Sometimes to begin you need to start at the end. Confused?
Think about it. The steps you need to take are determined by what your end goal is going to be.
The plan needed to lose 15 lbs. is very different from the actions required to compete in a Triathalon. The exact same holds true for financial fitness goals.
To develop a plan that is not only possible but beneficial, create a plan using the SMART goals technique.
S — Specific
Choose a clear, well-defined goal to work toward. I want to be financially stable is too vague. Try: I want to pay off my credit cards or I want to have X amount of dollars in my savings account.
M — Measurable
You must determine how you can numerically evaluate your success(es).
A — Achievable
Are your goals realistic and honestly attainable? Expecting to buy a new house in two years when you have 10k in credit card debt isn’t likely. Try for paying off the debt and opening a savings account for the down payment.
R — Realistic
Given your current situation what goals can be reasonably achieved? For this, you need to take into consideration the time, knowledge and resources available to you.
T — Timed
You must set a target date for completing your goals. Without a deadline, you’ll keep pushing it off until “tomorrow.” There must be a balance between not allowing enough time and giving yourself too much time.
It’s also important to write your goals down. You may need to go back and verify that you are on the right track.
Tip #2: Start Slow
You have to walk before you run. It may seem a bit cliche, but it makes the point.
When beginning an exercise program for the first time, the person literally will walk before they run. It’s about building endurance and pushing a little more each time.
When starting out a new financial fitness plan the same applies.
There’s no reason to think you need to start putting away half your paycheck right away. Start with a smaller amount, say $20-$30 per check. As you build your confidence start slowly increasing. But always maintain a level you’re comfortable with.
Starting out slow can prevent you from jeopardizing your financial future.
Tip #3: Check-In Time
Similar to a physician’s check-up which is encouraged for folks looking to start a first-time workout routine. You want to gauge your health.
A credit report examines your financial health. You’ll receive information about your financial history, plus the status of all your credit accounts including loans and credit cards.
There are three main credit reporting agencies — TransUnion, Equifax, and Experian. These companies are required to provide a free credit report once a year when requested. Keep in mind that some do not include a credit score for free.
A decent credit score is essential to qualify for the best possible loan rates.
Tip #4: Commit to Financial Fitness
It’s all about attitude. Sometimes we have to convince ourselves it will be worth it in the end. No pain, no gain, right?
Physically maybe you want to get in shape so you can keep up with the kids as they get older. Financially, perhaps you want to save up so you can spoil the grandchildren.
Like any athlete, your financial fitness depends on your focus, drive, and confidence.
Part of mental preparation is to constantly remind yourself of your long-term goals. Do you want to retire before you’re 75? Are you hoping to travel later in life? Maybe your desire is to leave a legacy for your children. Committing to see that happen helps you to decide what steps to take.
Go through your emails and say g’bye to any temptations (Read: unsubscribe).
Setup automatic paycheck withdrawals to a savings account. (Don’t forget to start small.)
Just say “No” to going out to lunch with coworkers.
This is the time to develop self-discipline.
Tip #5: Reward Yourself
It’s important to allow yourself to celebrate the small victories. Allowing for the occasional splurge keeps the momentum moving in a positive direction.
The runner who finishes a 5k under her personal time goal should go get that greasy cheeseburger and fries. Even the strictest of diets suggest a “cheat” day every once in a while. It helps alleviate the pull of temptations which could lead to serious setbacks.
Speaking of setbacks, slip-ups will happen.
The best way to deal with it is to let it go and move forward. Beating yourself up over it accomplishes nothing. Find a way to compensate and “makeup” for the regression. No Starbucks or take out for the next two weeks, etc.
Tip #6: Check Your Pulse
Are you aware of any person who sets out to get healthier by working out and doesn’t weigh themselves occasionally?
You’ve got to check in on your progress and keep track of how well you’re following your plan. Review your goals and make sure you’re moving in the right direction. Make adjustments as necessary.
You can do this weekly, at least monthly, and quarterly.
If you haven’t been tracking your finances because the thought of an Excel spreadsheet makes you shiver, there are other ways. There are a variety of free and inexpensive online budgeting tools that allow you to add your goals and track your spending.
Tip #7: Nothing’s Certain Except . . . Taxes
The date is ingrained in all our minds. April 15th!
A huge financial setback many people tend to forget about (or choose to ignore) is paying taxes.
Part of your spending plan needs to involve setting aside money for your tax bill.
A great practice is to reevaluate your withholdings. When fall comes around check the amount of money taken out for taxes to-date. Compare this to last year. Adjust accordingly.
Having a few more dollars taken out of each check is much easier to budget for. Having to come up with a lump sum in April could put a serious cramp in your financial fitness.
Flex Your Muscles
The greatest feeling after sticking to a workout routine is to look at yourself in the mirror and be proud of what you see.
Whether you pull out the bikini or can fit back into those slacks again, the sense of accomplishment fuels your desire to keep going.
Fuel your passion for financial fitness by starting a plan today. Evaluate your situation honestly and commit to changing any unhealthy spending patterns.
If emergencies do come up, we offer short-term solutions to get back on track.
Penny for your thoughts.
Have more suggestions for keeping financially fit?
Please share them in the comments below.