Have you ever decided to be more active or live a healthier lifestyle? Do you regularly set goals to improve your overall health? What measures have you taken to work towards these goals?
Just as someone embarking on a fitness journey asks questions to better their physical well-being, you too can take steps to improve your financial health by asking the right questions. As you’re already reading this blog post, congratulations! You’re on the right track! Asking questions surrounding your finances is the first step to improving your financial health.
For the sake of the analogy, think about being financially fit. What does being fit financially look like for you? Are you content with your current financial situation? Does your current financial shape align with your long-term goals?
Whether or not you’re on the right track toward your financial goals, it’s helpful to ask yourself these questions because it gets you thinking about your finances. As everyone’s financial journey is unique, there is no specific mold for being financially fit. Your money goals will differ from the next person, some of which may include being able to retire, pay for a wedding or college education, or save for that dream vacation.
If you’re looking to start making progress on your goals, here are a few tips to help get you started.
- Put together a reasonable budget. Detail your income and expenses by month so you know how much money is coming in and going out each month. This will help you understand your cash flow and identify areas where you can save. Your budget should be fluid and dynamic, changing over time in line with your goals and priorities.
- Start saving for unexpected expenses. These include things like medical emergencies, major car repair, and appliance replacement. These do not include expenses like purchasing a brand-new car, remodeling your kitchen, or having to have those fabulous shoes you saw in your favorite store. Nonetheless, best practice is to keep at least three months’ worth of living expenses in a high yield savings account as your emergency fund.
- Check your credit report at least once each year. Make sure that there are no mistakes. You can receive a free copy of your credit report each year from the three major credit bureaus: Experian, Equifax, and TransUnion.
- Invest as early and as often as possible. Though not guaranteed, starting earlier gives you a better opportunity for your investments to produce greater returns versus waiting to invest a larger amount over a shorter time period. There is value in investing sooner rather than later.
- As an example, hypothetically assume an equal rate of return of 8% for this scenario: If you invest $75 a month beginning at age 25 and continue until you are 65, you will have contributed $36,000 and your investments would be worth over $260,000! Your earnings will be far greater than the 35-year-old who invested $100 a month until reaching 65 (i.e., also contributed $36,000) with investments worth $150,000.
- That being said, it’s never too late to start investing!
- Begin saving for retirement early. Take advantage of employer-sponsored retirement accounts and explore additional retirement savings options like IRAs. Consider working with a financial professional to create a custom portfolio that aligns with your risk tolerance, estimates the number of years you expect or wish to retire, and incorporates other factors that matter to you.
- Develop and review a financial plan and consider sharing it with someone you trust. Having a strategic plan is essential for working towards your short and long-term financial goals. Review your plan at least annually, making any necessary changes as your goals or personal circumstances change.
There isn’t a one-size-fits-all financial plan. Each plan is unique because everyone has his or her own specific needs. Start setting realistic, achievable goals that will get your financial fitness on track. If you need help getting into financial shape, our team is happy to help hold you accountable. Sometimes, all you need to get going is a training buddy!