How Do You Become Financially Fit? – It Pays Dividends
One of the top New Year’s resolutions year after year is to get into better shape. People begin to focus on the food they put in their body and rush to the local gym to hit it hard…for about 3 weeks. Many of us bite off more than we can chew when we try to implement change after change all at once. Before you know it, you are sitting back at home, burned out, watching TV and eating Cheetos…We lose our battle with being fit before we even begin.
You may not always put the two together but trying to be financially fit often follows a similar path of becoming physically fit. We decide we want to begin “saving more” or “pay off debt” but after a few weeks of depriving ourselves of our normal luxuries and conveniences, we fall back into old habits and decide it isn’t worth it. But what if this year can be different? What if this year is the year you finally decide to finally become financially fit and make improving your financial situation an extended focus? Start small by creating a foundation that can help push you towards becoming financial fit.
3 Tips to Become Financially Fit
#1 – Track Your Spending
Where do you spend your money? Heck, do you even know how much you are spending? The most basic aspect of personal finance. You can’t become financially fit if you have no idea where your money is going every month. I learned this first hand in college. I worked part-time 10-20 hours a week but noticed that over time my bank account was getting smaller and smaller and I really didn’t know why. Once I finally realized that something was going on, I started tracking my spending, first through Excel and later through Mint, and was able to correct the behaviors that were causing the problems (mainly food and beer…whoops!).
With the rise in FinTech, there really isn’t a reason that someone shouldn’t know this information anymore. Mint and Personal Capital make it simple to see and categorize all your income and expenses automatically. Level Money can help you calculate how much you have to spend each month after accounting for income, bills, and saving. Digital not for you? Set up a simple spreadsheet and record each purchase you make (check out the It Pays Dividends Transaction Register if you are looking for a starting point).
The key is to bring awareness of where your money is going. I can almost guarantee that you will find that there are leaks that can be addressed allowing you to put more funds towards other financial goals. There isn’t a better way to start your journey to financially fit than figuring out where your money is going.
#2 – Pay Yourself First (and Automate It!)
Now that we know where our money is going, it is time to start taking away some of it before we even spend it. For some people, once that money hits their checking account, it is time to make it rain.
Luckily, there is a way to prevent yourself from spending your entire paycheck each pay day…Don’t let a portion of that paycheck ever hit your checking account. If the money isn’t there, you don’t have it to spend. Humans can be pretty lazy (myself included!). If money is easily accessible, it evaporates quickly. If, however, you make the money slightly more inconvenient to get to, the urge to take the time and energy to get it starts to fade. We don’t want to go through the hassle of jumping through hoops to get money just to spend on things that are unimportant.
If you have access to a 401k through work, be sure to set up contributions, especially to capture an employer match if one is offered (don’t pass up free money!). Check with your HR department to see if you can also have some of each paycheck deposited directly into a savings count, preferably one that is at a different bank than your checking account. Saving money directly from each paycheck is one of the easiest ways to save money before you have the opportunity to spend it.
If you have problems spending, try paying yourself first and never letting that money hit your checking account. It is hard to spend money that isn’t there!
#3 – Find a Support Person or Community
Finally, if you want to finally before financially fit, find a support person or community. Much like anything, it is easier to accomplish goals if there is someone there to hold you accountable for what you do.
I hate letting people down when I don’t do something I say I’m going to do. I feel guilt and anxiety whenever it happens which has motivated me to be more and more proactive in accomplishing things. If you are anything let me, having an accountability or support person may be exactly what you need to give you the extra motivation to keep going when you feel like giving up. As I’ve talked about before, we will all have times that we are lacking motivation, but if you have to report to someone daily, weekly, or monthly on your progress, it helps give you a little extra push to get over any bumps in the road.
Don’t have that person in your life? There are numerous online communities that have people that will help hold you accountable. Check out financial forums like the Mr. Money Mustache. There are many blogs that even have private Facebook groups that you can join to help motivate. Heck, if you need someone to help keep you accountable, reach out to me; I’d love to check in on you every once in awhile to make sure you are continuing to make progress towards becoming financially fit.
It can be easy to give up on your goals when you are on the journey by yourself Find someone to help hold you accountable to your goals.
Anyone can become financially fit – help yourself out by creating a solid foundation of tracking your spending, paying yourself first, and utilizing a support person or community. Just like anything, it will take work and dedication but if you start small and in the right direction, you will improve your chances of success. Who knows, maybe this is one resolution you will actually keep!
Do you consider yourself financially fit? If so, how did you get there? What other ways can help someone become financially fit?
This post is part of Credit Card Insider’s Financial Fitness series which focuses on advice for becoming financially fit in the new year. If you are curious about your credit score or credit cards in general, check out their Learning Center, which is a great resource for questions related to credit.