What is Financial Fitness?
We are all striving for something. Many of us strive for financial freedom, which to many means having the means to do what I want when I want. And, to have a housecleaner, lol. But what is financial fitness?
Is it having control over your money? Is it being able to pay your bills on time? Is it having more money coming in than going out? If you’re a business owner, is it having plenty of cash flow?
The short answer is yes, it’s all of those. And more.
So, how do you achieve financial fitness?
Good bookkeeping is key. If you track all your money coming in and going out accurately, then you will have a clear idea of what is going on and can make informed decisions about your money based on that information. It doesn’t mean you’ll have financial freedom right away, but it can help you set your priorities and it sets up the foundation for financial fitness.
If your goal is to eventually have financial freedom, then every decision you make will either take you closer to that or it will take you further away. Of course, life gets in the way and must be considered too.
What we mean by that is:
- Prioritising your needs & wants
- Determine how to allocate the time & money that you have.
For example, if you like to travel. You can choose to save money toward your long-term goal of being financially free or you can choose to enjoy the time you have now and allocate some of your money for travelling. If you do, you’ll know what you’re forgoing investing in the future. It’s your choice.
However, if you have the opportunity to spend three months travelling around the world but will have to borrow money to do so, you may decide to refrain, choosing instead to live within your means and take a week-long trip to Queenstown instead for example. Being financially fit means not going into debt unnecessarily. Obviously, travelling is a want, not a need. If you needed emergency surgery and didn’t have the money, you might not have a choice. Though if you’re really on top of your financial fitness, you’ll have 3-6 months reserves in the bank so that in an emergency, you won’t need to use a credit card, you can borrow from yourself and build your reserves back up later.
Too many Kiwi’s live beyond their means and don’t have anything saved for a rainy day. Being financially fit means figuring out how to save every month. You may have to look hard to find extra to save, but chances are it’s there if you dig and re-prioritise your goals. Defining what is a need and what is a want is the first place to start. Many people are unclear on the differences. It can be the difference between using your existing cell phone until it’s starting to die, and you must replace it, as opposed to buying a new one every year when the latest and greatest model becomes available. Or, it could be reviewing all your subscriptions (Gym, Netflix, Dropbox, etc.) and evaluating which ones you utilise regularly and are worth keeping and which ones you CAN live without (or downgrade to a lower plan). Subscriptions are a part of life now, but it is best to review them periodically as most will auto-renew whether you’re using them or not.
Financial fitness comes one piece at a time.
Strive first to track all your income and expenses accurately so you can determine if you (or your company) are living within your means. Once you determine that you can decide if you need to trim your expenses in order to have more funds available to allocate to long-term savings or pay off debt. Once your debt is under control, you can begin to save for both short-term goals and long-term goals.
If you don’t know what’s going on with your money, chances are you won’t get where you want to go.
If you need to get there faster, consider a debt consolidation loan. This will immediately help you budget better and make it easier to put your financial plans in place. Whatever you need, we’re here to help – apply online and let’s see what we can do for you!