Become Financially Healthy – Need to Know your financial goals

Your Guide to Becoming Financially Fit

  What does it mean to be financially fit?  There is an easy comparison to physical fitness to make.  When a person is physically fit, they have taken care of their bodies by exercising and controlling their diet.  By doing so they have made an investment in themselves with the anticipation of enjoying a long and healthy life.  If, instead, your goal is financial fitness, then your aim is to strengthen your own personal finances so that you can make an investment in your fiscal future. Possibly you are tired of living paycheck to paycheck. Maybe you recently decided to start adding more money to your retirement savings. Perhaps you and your family have just welcomed your first child.  There are a lot of reasons to get your finances in order.

What are your financial goals?

  If you want to attain financial fitness, you need to make some serious commitments.  These changes will not be easy, but they can eventually afford you with freedoms that you didn’t think possible.  The first step is to establish what your own personal goals are.  Do you want to save for retirement?  Will you need college money for your kids?  Do you have a well-stocked emergency fund? Once you have established your goal, and have estimated the amount of money you will need to achieve it, then you need to make a commitment.  Financial goals can only be reached through strength and dedication.  Remember that to meet your goals, you will have to make a change in your lifestyle.  This change will not happen overnight and don’t expect quick, miracle results.  It is going to take time and loyalty to your cause.

The distinction between financial wants and financial needs

  After establishing your goals, the next step toward financial fitness is to consider which of your current expenditures are rooted in needs and, which are rooted in wants. Although modern consumer culture tends to blur the line between what you need and what you want, any product or service that is not necessary to sustain the basic needs of survival—clothes, food, shelter, and transportation to work—are essentially products or services that you want but do not need. A clear method for establishing this distinction is to review bills and bank statements from a previous month.  Whatever the amount of money that was allocated to your fiscal wants over the prior month is a general representation of the funds that you could allocate, each month, toward your long-term financial goal. The amount of fiscal wants that you choose to reduce or eliminate will determine a realistic scope for savings toward your goal, as well as a practical time-frame for meeting your goal.   Making a clear distinction between financial needs and wants does not mean that you have to stop spending on products and services that bring you joy and comfort; rather, the distinction is intended to prioritize your wants within the context of your financial goals. The larger the scope and shorter the time-frame of your financial goal should determine the amount of money that you will have to eliminate or reduce from your monthly expenditures on wants. This, of course, is where the strength and discipline are required in meeting your financial goal. When tempted to spend on wants that are outside of your monthly budget, you should consider the purchase as a reduction from the funds intended for your financial goal. While exceptions to your monthly budget may occasionally occur, the fundamental realization toward meeting a financial goals is that the more control you can take over you’re spending, the additional control you will have over meeting your goal.  

Tips for taking control of your finances

 

Create an emergency fund

  Save money for a rainy day.  One aspect of being financially fit is stability.  Being financially stable means that if your car breaks down you won’t have to borrow money from friends or get a loan to fix it.  Consider the worst, what if you unexpectedly lose your job and cannot find another for six months. Imagine how much your family would suffer.  However, if you already had the money saved in an emergency fund you could weather the storm.  A general rule of thumb is to save 10% of your income for your emergency fund; once you have reached a reasonable amount of at least $1,000, you can start putting that money elsewhere.  

Start a few savings accounts

  Set aside money for your future. Contribute regularly to your retirement fund.  Many employers offer retirement savings that can be deducted instantly from your paycheck.  When money is taken straight from your paycheck, you will never miss it.  Have the maximum withdrawn from every check.  It is hard to plan for the future, but if you don’t do it, who will? Put money aside for your children to go to college.  Even if you have just welcomed your first child, and they are still in diapers, you will want to be prepared. Go to your local bank and open up an RESP or Registered Education Savings Plan.  The government will match your child’s savings at a certain percentage. This is the same as getting free money.  Take advantage of it! Consider finances that will be needed for medical bills or a new car.  

Don’t neglect your current financial obligations

  Make sure that while you are working towards your financial goal that you don’t start neglecting necessary responsibilities.  Keep paying your cable and electric bills on time. Creating a stable financial future for yourself is important but not at the cost of throwing yourself into a financial crisis by not paying debts on time.  

Make a budget

  Create a monthly budget and by all means stick to it.  Knowing where every penny goes affords you control over your finances and give you a sense of predictability.  Making a budget also can be very informative.  It can be a golden opportunity to examine the difference between needs and wants. Do you need to have ice cream every day after dinner? Or do you want it?  Be honest with yourself, do you need the fancy detergent with that smells like mangoes? Or would the off brand, which is $2.00 cheaper do just as well? Consider it a challenge to save the most money.  Budgets are hard to get used to.  It feels like being robbed of something we want.  Even so, it just takes some dedication and practice.  The corners you cut by using a budget can help fund your savings. People who start and stick to a budget feel more secure about their money and have a greater sense of control-that really is the goal with financial fitness.  

Make a budget

  Check out local grocery flyers for in-store deals. Grocery stores typically run weekly deals that they advertise in mail flyers. Additionally, stores often have member advantages.  If you aren’t already a member of your grocery stores savings group-get signed up.  Check out your favorite newspaper for coupons to clip.  There are many websites that specialize in online coupons.  Usually, you need to download their particular software and sign up for a free membership.  Using online coupons can save you even more cash at the store since groceries often will recognize double the amount on the coupon.  Using coupons is tied directly to your budget.  Maybe it doesn’t seem like a lot saving 10 cents on yogurt, but it adds up after a while. Every cent counts.  

Cut out unnecessary spending

  Do you spend $100 on a haircut?  Perhaps buying expensive shoes is your vice?  Cut back!  Instead of stopping for coffee on the way to work, brew your own and take it in a travel mug. Consider skipping the weekly trip the movies and rent a film instead to watch at home.  Cook meals instead of dining out, it can be a great bonding experience for the family.  Get a library card; spend time reading free books.  

Save money faster by making more money

  Do you have a bunch of stuff lying around the house?  Why not have a yard sale?  Have you ever considered posting items for sale on eBay? Ebay has tutorials to help you along, and they are there to answer any questions you might have. This is a great way to clean out your place and put extra cash towards your goals.   Have you considered your skills?  Do you enjoy quilting or have an interest in making ships in bottles?  Put those skills to use and make some money.  Advertise on the Internet.  You might also consider getting a part-time job. Get your hands dirty and do the jobs that no one else wants.  Not only will you get a tangible sense of satisfaction, but you will substantially help yourself save money.  All extra sources of income will help you on your way to financial fitness.  

Frequently check on your progress

  Keep an eye on your money at all times.  Don’t assume that things are going according to plan.  Frequently monitor how much money comes in and exactly where it is going to. Remember financial fitness is all about control and predictability with your money.  

Consider seeing a financial advisor

  If you really are committed to changing your lifestyle and becoming financially fit, but you aren’t seeing any progress, consider getting a financial advisor. Check out The Financial Advisors Association of Canada, advocis.ca, search online or visit your local branch. Financial consultants specialize in a variety of things; some focus on retirement, some on college planning, etc. A consultant will sit down with you and look over your finances.  They will advise where you can save money and help you arrange accounts to do so. Find one who can help you meet your goals.  

A cautionary word

 

Much like physical fitness, financial fitness does not come overnight.  It takes hard work, dedication and time.  Having control over ones finances give them a sense of freedom and security.  Freedom from the worries of “what if my car breaks down?”  Security knowing that loved ones will be taken care of in an emergency.  From start to finish it can be a journey of frustration, happiness, and tears.  However, one day when you feel a sense of control over your finances and realize that they don’t control you, it will all be worth it.