Achieving financial fitness is similar to stepping up your physical fitness, and you can get ready for it in 5 similar steps.
When you decide to run a marathon you get ready before going out for that long 26 mile run. Firstly you know the long-term goal and from that goal you build in short-term measurable goals and create a training plan. Then you break those training days into exercises and small measurable sessions, which once added back together help you achieve that marathon. You also get your equipment and the support you need before you start.
Some of the challenges you face will be physical, some will be around time and many will be emotional or mental. You may need to overcome the mindset of ‘I can’t do this’, or ‘I’d rather spend my time doing something else today’.
Finances are no different.
What is Financial Fitness?
Financial fitness is being in a position where you can financially face whatever life throws at you. Where you are financially strong and flexible enough to meet day to day and unexpected challenges, whilst remaining financially and emotionally secure, with an eye on your future goals.
This could include recognising if you need to increase your income, reduce outgoings or pay down debt, lay down more savings and investments or putting in protection for the risks you can’t afford to take.
Much like preparing for that marathon there are some steps to get ready for becoming financially fit which will increase your chances of success as you begin establishing the new money habits and working toward being financially resilient.
Step 1 – Commit to financial change
Much like when deciding to run that marathon, complete a couch to 5k or increase your fitness so you can enjoy life more, the desire to change has to be there.
It is a promise to yourself to step up and change what you are doing today, because you want a different tomorrow.The #Finfluencer
Now is the time to identify what might get in the way? What thoughts, feelings or events might create an obstacle for you? And what you can do to make sure you stay on track.
You know you best. Will it all go to plan until you feel stressed, if your midnight emotional spender comes out? Or if your income reduced or you simply get bored?
Write a list of things you think might get in the way and a list of possible solutions. Knowing what can de-rail you and preparing for it means you are more likely to overcome it and stay on track with your commitment.
You first have to decide you want to become fit in order to get financially fit.
Step 2 – Set clear financial goals
You goal can be small or big, long or short term, it just has to be personal to you and absolutely clear.
Make sure your goals are clear, attainable within your timeframe and 100% measurable.
If you want to pay down uncontrolled expensive debt, set a reasonable timeframe and make being debt-free your goal. You’ll be able to measure this by the reduction in debt.
Where you have very little savings and want to build an emergency fund, that becomes your short term savings goal. Set a date and you’ll be able to measure the increase in savings against the time passed.
Your goals need to be attainable. There is nothing more disheartening than setting a goal that can never be achieved and then losing heart and giving up.
Step 3 – Find Support
In the same way having a personal fitness trainer, or a group of like minded people to train with helps your marathon stay on track, so is true of having a money coach or a group of people on the same financial journey.
Find a finance coach or join an online community, listen to money podcasts or read personal finance books. Choose the support that works for you and know that you are not alone.
Step 4 – Create your financial fitness plan
This doesn’t have to be complex. A simple document with your goal(s) written at the top and the date aiming for and the steps to take along the way.
Emergency Savings Example:
Goal: To save £3,000 for an emergency fund within 6 months
Steps: Save £500 each month into a separate cash savings account
Sense Check: is the goal achievable? If not modify the timeframe or look at ways to increase income, side hustle, car boot sale, ebay and/or reduce your outgoings, cancel subscriptions, find shopping bargains or reward schemes over that time period.
- Open – a separate savings account away from your day to day spend
- Automate – set up direct debit on payday to pay yourself first into the savings
- Sense check – action anything from your sense check list you identified eg cancel subscription
Step 5 – Start. And Stay Started.
Avoid procrastination. Don’t wait for “something” to be ready. Just start. Even a small start is a step forward. The new habits will come with time, just start and stay started.
Once you’ve got started there are steps to keep going which are all achievable, I know because I’ve been through them personally. Next we’ll look at the 6 steps to staying on track with your financial fitness,
HINT the most important one is consistency.