A Simple Plan to Regain Financial Fitness
Most of us are not financially fit. We are not completely aware of how our money is being spent. We have too much debt and spend money on the wrong things. Sometimes we do this to keep up with appearances. If your motives aren’t right then how can you financially fit? While it can be challenging to turn things around, financial fitness is well within your reach if you use this simple plan to regain financial fitness.
There is no single, correct path to financial prosperity. Different things work for different people, you just have to figure out which path is the right one for you to follow.
While there are multiple paths, there are some steps that are critical, regardless of the path followed:
1. Know where your money is being spent.
Many people only have a vague idea about how much money they make and where it goes. The first step to financial fitness is to know exactly how much you’re taking home and where it’s being spent. Track how you spend every penny each month. There are a lot of apps out there that can help you track your spending habits.
2. Set short-term and long-term goals.
Set a few goals that will cover the next month, year, and five years. And with these goals, you also might want to check out some Term Life Insurance Quotes so you know you are covered if anything should happen to you.
Realistically, you have to ask yourself the question of how are you going to make these short-term and long-term goals happen?
3. Allocate your spending wisely.
A few simple guidelines will help you to regain your financial fitness. If you’re already in a good place financially, these guidelines will help you to stay there:
Keep your fixed expenses to 50% or less of your take-home pay. This includes things like rent or mortgage payments, utilities, car payments, gas, and food. Basically, the things you must spend money on each month.
Use 20% of your take-home pay to build an emergency fund, pay off your debt, and try to save for your retirement. It is recommended that your emergency fund be able to cover your fixed expenses for 6-9 months. How the money is split between your retirement, debt, and emergency fund will depend on your situation.
The remaining 30% can be used as you see fit. This is the money you can spend on vacations, eating out, or hiring a landscaper. This money can also be put towards the previous category, but be sure to enjoy your life along the way.
4. Eliminate your debt.
Debt is the most important obstacle to your financial fitness.
Be aware of your credit score. There’s no need to ever pay to get your credit score. There are many free options available, like CreditKarma.com. Lenders are obsessed with your credit score. You should be even more obsessed.
Be careful with your credit cards. It’s always best to be cautious about whipping out the credit card. If you don’t have the money in your bank account, it’s important to think about how critical this purchase really is.
5. Get adequate insurance. What could be worse than finally getting back into good financial shape, only to have it all wiped out by an illness or house fire? Protect your assets and limit your liability.
Reaching a point of financial fitness is a worthy objective. Not only does it give you the opportunity to relax and enjoy your life, but it also makes your future much more secure. Allocating your funds properly helps to ensure that you have enough.
