Being Financially Fit, Part 1: You need a plan (budgets are the maps of personal finance)

There are millions of different opinions, articles and self-help books about how to structure your finances. So how you avoid getting caught up in the weeds?  The formula for being financially fit is easy; the execution is the tough part.  Just like the whole diet/fitness industry, you will find millions of ways to get in shape, lose weight fast, how to have a 6 pack! Etc. The diet/fitness industry and the personal finance industry have a lot in common, both are simple, the execution is the hard part.  How do you lose weight?  Well take a look at calorie intake for your age group, consume a balanced diet according to your target calorie intake and exercise for 30 minutes 3-5 days a week (easy right?).  How do you become financially fit?  Well, save more than 20% of your income, live debt free, and invest (again, that is easy right?). 

So why do so many people struggle with both these concepts?  I believe it all comes down to behavior and training yourself to have discipline.  After you train yourself to live a certain way, it just becomes second nature.  The introductory period/change in behavior is the tough part.  So how do you begin? You need to have a plan.  My value proposition to the world is show people how much happiness/value you can add to a person’s life by creating a financial plan and sticking to it. 

Think about it, do you go to the grocery store with a list?  How much easier is it? How much happier are you at home?  Personally, making a list at the grocery store creates a lot of value for me.  First, I spend less time in the store which I like.  Second, I don’t waste as much food ($ savings!). Last, I have the food I want during the week (SNACKS and good meals!).

Now think about how you manage your yearly budget.  Do you have one?  How do you know where you will end up at the end of the year?  How much can you spend each month and still save enough?  What are your financial goals? How are you tracking compared to those goals?  Do you ever stress about money?  Why would you live without a plan to monitor one of the most important aspects of your life?

In my opinion, many people in my age group (generation Y) just turn a blind eye to having financial goals.  We think the world owes us, and at some point we will have the nice house, nice cars and fat savings accounts.  But again I ask how are you going to do this?  Ask yourself, what is the plan?  Most people cannot see further than six months from now.  Every financial decision you make daily will greatly affect you for the rest of your life.

The first part of being financially fit is to develop a plan.  Think about how useful it is to have GPS on your phone.  You know exactly where you are going and how long it will take to arrive.   This is what your yearly budget plan should be, a roadmap for your future.  Think about the stress it will take away when you understand exactly where you will be at the end of the year; as well as what you need to do each day/week/month to get there.   The correct plan for you is unique, but each plan has the same underlying principles.  

How will I come up with a plan?  What is the financially fit plan for me?  How will I get out of debt?  How should I plan for the large purchases in my life?  If you are asking yourself these questions, you are heading in the right direction.  Becoming financially fit is a total transformation of your current lifestyle.

Tune back in for the next installment – Being Financially Fit, Part 2: The Plan (how to create a budget).

If you have any questions or you would like help becoming financially fit please contact us and we can talk about getting your finances in shape.