What is Financial Fitness?
We are all striving for
Is it having control over your money? Is it being able to pay your bills on time? Is it having more money coming in than going out? If you’re a business owner, is it having plenty of cash flow?
The short answer is yes, it’s all of those. And more.
So, how do you achieve financial fitness?
Good bookkeeping is key. If you track all your money coming in and going out accurately, then you will have a clear idea of what is going on and can make informed decisions about your money based on that information. It doesn’t mean you’ll have financial freedom right away, but it can help you set your priorities and it sets up the foundation for financial fitness.
If your goal is to eventually have financial freedom, then every decision you make will either take you closer to that or it will take you further away. Of course, life gets in the way and must be considered too.
What I mean by that is:
Balancing resources:
- Prioritizing your needs &
wants - Determine how to allocate the time & money that you have.
For example, I like to travel. I can choose to save money toward my long-term goal of being financially free or I can choose to enjoy the time I have now and allocate some of my money to my traveling. If I do, I know that I am forgoing investing in the future. It’s my choice.
However, if I have the opportunity to spend three months traveling around the world but I will have to borrow money to do so, I may refrain, choosing instead to live within my means and take a week- long trip to New York instead. Being financially fit means not going into debt unnecessarily. Obviously, traveling is a want not a need. If I needed emergency surgery and didn’t have the money, I might not have a choice. Though if I’m really on top of my financial fitness, I’ll have 3-6 months reserves in the bank so that in an emergency, I don’t need to use a credit card, I can borrow from myself and build my reserves back up later.
Too many Americans live beyond their means and don’t have anything saved for a rainy day. Being financially fit means figuring out how to save every month. You may have to look hard to find extra to save, but chances are it’s there if you dig and re-prioritize your goals. Defining what is a need and what is a want is the first place to start. Many people are unclear on the differences. It can be the difference between using your existing cell phone until it’s starting to die, and you must replace it, as opposed to buying a new one every year when the latest and greatest model becomes available. Or, it could be reviewing all your subscriptions (Amazon Prime, Netflix, Dropbox, etc.) and evaluating which ones you utilize regularly and are worth keeping and which ones you CAN live without (or downgrade to a lower plan). Subscriptions are a part of life now, but it is best to review them periodically as most will auto renew whether you’re using them or not.
Financial fitness comes one piece at a time.
Strive first to track all your income and expenses accurately so you can determine if you (or your company) are living within your means. Once you determine that you can decide if you need to trim your expenses in order to have more funds available to allocate to long-term savings or pay down debt. Once your debt is under control, you can begin to save for both short-term goals and long-term goals.
If you don’t know what’s going on with your money, chances are you won’t get where you want to go.
Contact Sherrington Financial Fitness today if you need help in determining where you stand financially.
Sherry Lutz Herrington is the owner of Sherrington Financial Fitness, a business consulting and accounting firm specializing in strategic business planning and solid financial accounting for businesses. She is also the author of Strong Women Thriving (https://strongwomenthriving.com/), a blog which focuses on empowering women to be financially savvy, particularly after experiencing financial abuse. Sherry is currently writing a new book that both shares her personal story and addresses financial abuse. She can be reached at hello@strongwomenthriving.com.