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7 Steps To Fiscal Fitness

To become physically fit, one must learn the principles and best practices that others have used to achieve their fitness objectives; the same applies to financial fitness. It requires long-term discipline, determination and confidence about your financial situation. It means that one must train to manage money in a way that meets short-and long-term needs.

Here are 7 steps to Financial Fitness according to cfainstitute.org:

  • Set goals.
    • You can’t reach goals that you don’t set.
    • Planning to use savings and investments to reach your goals is key.
    • Determine how much to save over time to finance your dreams.
    • Include an emergency fund in your financial goals.
  • Understand where your money is going.
    • Create a budget that includes necessities, discretionary items, and the periodic savings necessary to finance long-term goals.
    • Track your spending. Compare it regularly against your budget and make changes to your spending habits where necessary.
    • Use the knowledge and skills you gain over time to spend less where possible and save more.
  • Manage your debt.
    • Curtailing the use of debt to consume is crucial when trying to optimize savings and investment capital.
    • Avoid high-interest rates and fees by minimizing the use of credit cards.
    • Build a debt management strategy to reduce and eliminate high-interest debt and to accelerate the payment of debts like student loans and your mortgage if they are a priority.
  • Put your finances on autopilot.
    • Direct deposit into your savings account so that you don’t spend it.
    • Ensure regular contributions go to retirement and investing accounts.
    • Use auto-pay for recurring bills like loan payments.
    • Use a money management application to track spending.
  • Maintain a steady lifestyle.
    • Spending does not have to grow at the same rate as income.
    • Growth in income, bonuses and other windfalls can increase savings and investment accounts.
    • Keeping expenditures relatively constant over time is a key method in achieving a secure financial future.
  • Invest wisely.
    • Establish a low-cost, globally diversified portfolio that’s appropriate to achieve both short- and long-term goals.
    • Use a broadly diversified portfolio of global stocks and bonds to obtain a proper return in regards to your attitude about, and ability to take, financial risk.
    • Where appropriate, thing long-term and don’t be overly focused on the short-term performance of your investments. Stick to your investment plan and review your portfolio periodically to stay on track.
  • Obtain knowledge and advice.
    • Being financially fit means understanding and utilizing the main principles and best practices in saving and investing.
    • When needed, get help from an accredited investment adviser that can help you build an investment plan and portfolio to meet your financial needs.

It’s been proven that optimizing savings leads to meeting financial needs and building wealth. Financial fitness can apply to anyone, regardless of age, nationality, or income.

Taking the steps to financial fitness may not be easy, but like any type of training, the time, energy and discipline will pay off over time.

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