Like a lot of people, I start each New Year with some new goals. Notice I didn't say resolutions. Because how often do we really keep those anyway? Usually, my goals include something about getting healthier—either mentally, physically, or both. As I get older, I've put more emphasis on staying strong and in shape so I can keep up with my kids!
What does this have to do with finances? To me, becoming financially fit and physically fit have a lot in common. Both require determination, discipline, and the ability to keep going. And they both make you feel great when you've achieved your goals.
There are different ways to get started, but whenever I set out to meet a new fitness goal, whether it's to get stronger, to eat better, or to set aside time to meditate, I use some type of app to measure my progress. I use MyFitnessPal to track my food, exercise, and water intake, and Headspace for meditation and sleep. If I have that accountability, I know I'll meet my goals. There are similar tools to help you track and meet your financial goals.
So, let's say you're determined to get in better financial shape in 2024 but you're not sure where to begin. Here are seven smart moves to help you build some lasting financial muscle.
1. Find your starting point.
Just like with physical fitness where you might start with an annual physical exam or a strength assessment, to become financially fit you must assess where you are now before you can decide what you want to achieve. And it's not just about your investments. Think holistically and look at your complete financial picture.
I'd start with a financial checkup. First write down everything you own—savings and investment accounts, car, home, and personal property. Then list all your debts—mortgage, car loan, credit card balances, and student loans. Now subtract what you owe from what you own. Are you in the plus or the minus? This is your net worth. Next, look at where your money went last year. What came in each month after taxes, and what went out? Did you regularly spend more than you earned? This is your cash flow.
With this information as your starting point, you can plan your next moves. Plus, you now have something to measure your progress against, which will help you stay motivated.
2. Set small, achievable goals.
For me, the best way to make real progress toward my fitness goals is to break them down into smaller, achievable steps. The same can work for your financial goals. For instance, you want to save for retirement, but that's a big goal and takes years to feel that achievement. Something you can do now to make progress is to increase the percentage you contribute to your 401(k) by a small amount. Or maybe you're spending too much on restaurants. You could give yourself a monthly limit on eating out. Then when you see some results—like your 401(k) balance is larger than it was this time last year or you have more cash flow because your restaurant bills have been cut in half—treat yourself to something special to celebrate your achievement.
3. Control your spending.
This does take discipline—just like trying to control your eating or diet—and with financial goals, it takes a budget. First, get specific about how you're spending your money. The best way I know to get a handle on cash flow is to itemize and add up your monthly expenses, both fixed (meaning they are the same each month, think internet bill) and variable (meaning they might change from month to month, think shopping and eating out), then subtract them from your income. Are you overspending regularly? Time to prioritize and figure out what you really need to spend your money on and where you can cut back. You might be amazed by how eliminating unused streaming subscriptions, a few lunches out, or Uber rides can quickly bring things under control.
4. Reduce your debt.
When it comes to being financially fit, getting rid of high-interest credit card debt is an important move. There are different ways to do this. You can focus on paying down the highest interest card first or decide to tackle the smallest balance first. Or you could consolidate all your credit card debt onto a single lower-interest card and pay that down. Choose a method that works for you. When you've met your goal, acknowledge what you've achieved. Go ahead and buy that bottle of champagne. Just don't charge a trip to Aruba!
5. Pump up your savings.
Don't think of saving as giving up something now for something way in the future. Think of it as paying yourself first. Commit to saving a certain amount each month. Start or add to your emergency fund. Contribute up to the max on your 401(k). Even increasing your saving by 1% a year can mean you have significantly more in 10 years' time.
6. Stretch your investing knowledge.
Whether you're a new or more experienced investor, keep challenging yourself to learn more. Take a class, join an investors' group, explore online investing resources. Financial fitness isn't just about the money you have today; it's about understanding how to create long-term financial well-being.
7. Get support.
Apps and online resources can be great motivators, but sometimes you need a "personal trainer" to keep you on track. Financial advisors aren't only for the wealthy. Talking to an objective advisor can take the emotion out of managing your money and help you think differently.
Finally, find ways to make getting financially fit fun! Partner with a financial buddy with similar goals and cheer each other on. Join a community of investors who are in a similar place in life. Share your experiences, celebrate your achievements. And realize that it takes time. Just like with physical fitness, the longer you keep at it, the stronger you'll be financially. And that's a really good feeling. Happy New Year!
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
This information on this website is for educational purposes only and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, you should consult with a qualified tax advisor, CPA, Financial Planner, or Investment Manager.0124-3JK7