What’s Your Financial Fitness Strategy?

Who do you know that isn’t trying to lose weight, exercise more, or reduce their stress level?

What does financial fitness have to do with physical fitness you may ask?FinancialFitness

Well, considering that 71% of Americans say finances are a significant cause of their stress and financial stress increases the odds of developing a chronic illness, I’d say it has a lot to do with physical fitness.1

So add financial strength training to your workout routine.

How to get started

Step 1 – Create your routine

Do you routinely save money towards an emergency fund or future goals? If you don’t, you’re not alone. Two out of three households don’t even have a financial emergency fund, let alone money set aside for long-term goals or retirement.2

The first step is to have a vision of your future. Is it a home purchase in the next five years or are you dreaming of a vacation home? When do you want to retire? Or better yet what does retirement look like for you? Do you plan to completely stop working or scale back and change the focus of your work?

Give thoughtful consideration to what you want your future to look like and then write it down.

Step 2 – Determine how much money it will take to make your vision a reality.

Take some time and do the numbers. There are lots of calculators available on the web to help you determine how much you need to accumulate and how much you need to save on a regular basis to reach your goal. Don’t forget to account for inflation.

Step 3 – Find the money to make it happen

Are you currently saving? If so, congratulations – very few people save on a regular basis. Get creative and look for ways to find money you may be losing unknowingly and unnecessarily.

  • Are you paying taxes on your interest earnings? If you are, you may want to consider saving tax deferred, that way your interest isn’t reduced by taxes each year which can help accumulate more dollars. You will eventually pay taxes on those earnings, but all other things being equal, the compounding of a tax-deferred account should accumulate more than a taxable account, even after the taxes are paid.
  • Does your employer offer a retirement plan that matches your contributions? If so make sure you are making deferrals at a level to get the full match – get all that your employer is willing to give you.
  • Do you get a large tax refund each year? Are you putting any into your savings? To avoid impulse spending when you receive a large refund, you may want to consider lowering your withholdings and then put the extra money you get in your paycheck into your savings each payday.
  • Do you have money in your emergency fund to cover higher insurance deductibles? You may be amazed at how much your premium will go down if you raise your deductible. The difference in premium can become dollars to add to your savings.
  • Are you paying extra on your mortgage? Most of us are conditioned to pay off our mortgage as soon as possible but does it make the most financial sense? Take a look at different mortgage durations and compare what the future financial value will be if, instead of paying down the mortgage, you saved the difference in the payment amount.

Step 4 – Get a Pro’s opinion

Once you have a draft of what your routine will look like, it may make sense to get a second opinion. Your tax advisor is a good place to start. You may also want to get a financial planner’s opinion as well. They have access to tools that can help you with different calculations to decide what changes may make sense for you. They may even be able to help you find more money!

Step 5 – Start your exercise routine and update it regularly

You took the biggest step – you created a routine for saving. As you know life changes, so make sure your routine is adjusted regularly to focus on those trouble areas to reduce your stress and strengthen your overall health.
1 American Psychological Association. (2014 Stress in America. Retrieved December 28, 2014.
2 Consumer Federation of America., & Certified Financial Planner Board of Standards, Inc., (2012). Household Financial Planning Survey and Index.