How to get financially fit: Useful tips to help you build and maintain your financial fitness

What does it mean to be financially fit?

When you think of the word fitness, you think of the body and its ability to function efficiently and effectively. Someone nimble, who can climb a mountain without getting tired or can fight infection and illness quicker than an unfit person. Being financially fit isn’t so different.

It’s really about being able to deal with unforeseeable misfortunes and pay off credit debts like mortgages or medical bills on time. Essentially, when we talk about financial fitness, we’re talking about getting to a place where your money is being utilised effectively. So, how can you be financially fit? Well, we’ve put together a few helpful tips to get on the road to financial prosperity.

If you fail to plan, plan to fail

If you’ve read the Barefoot Investor, you’ll have heard the author, Scott Pope talk about arranging a date night once a month to address your finances. This is a great place to start on your journey to becoming financially fit. Go treat yourself to a fancy dinner while you work on your money and take the stress out of organising your money.

By doing this each month, you’ll be saving much more money than the cost of the bill at the end of the night.

When you’re ready to get into the grunt work, start by setting yourself a financial plan that is:

• Specific | to your financial situation.
• Measureable | keep it simple and easy to follow.
• Actionable | have practical value.
• Realistic | be bold and swift.
• Time bound | plan ahead for a minimum of 5 years.

You’ve probably come across the acronym SMART before. It can be a great tool to help you reach your goals in many different walks of life. So, try applying it to your finances and see what kind of difference it can make.

Dealing with the ‘untouchables’

When it comes to becoming financially fit, you’re going to have to set some boundaries. Create a bank account, put some money in it and watch it grow. Only let yourself add to this account. Try deposit whatever you can weekly/monthly, whichever suits you. Never ever let yourself withdraw from this account unless there’s an apocalypse. So batten up the hatches and back away!

We should all be focusing on planting money trees that will fruit with age. By having an account that is never negatively interfered with, you will start to receive considerable compound interest. This is like double chocolate topping for your savings. You’ll be earning interest on your interest.

Don’t forget your free annual credit report

Your credit report will give you everything you need to know about your past, current and future financial situation. Each year, you’re entitled to one free copy of your credit file report. There are three companies for you to choose from, namely, Equifax, Illion and Experian.

If you require more than one credit report per year, once you’ve received for your free copy, you can apply for more. We recommend ordering them separately, possibly each quarter throughout the year so that you can keep a close eye on your credit.

Know your net worth

Assets – Liabilities = Net Worth

The great Benjamin Franklin famously once said, “but in this world nothing can be certain, except death and taxes.” Let’s not be morbid for now though. Ignore the death part and just focus on your taxes.

Ask yourself these questions to work out where your money is going:

• How much money do you make?
• How much do you spend?
• What tax are you paying?
• How much are your bills?
• What outstanding debts are you paying off?

Use your online bank statements and software like QuickBooks to view your spending history. If you’re going to become financially fit you need to find out where your spending money is leaking. What are the bad spending habits that knock you down each month?

Ensure that you are paying off your debts at a rate that suits you. The recommended amount you should be taking from each paycheck to pay off your debts is 20%.

Get better at budgeting

On your journey to becoming financially fit, you have to learn how to get good at managing your money. Budgeting can be tricky unless you get the right guidance and make a plan that suits you. To budget effectively, you need to create a simple plan for your spending.

You might want to consider using the 50/30/20 rule, a simple tool devised to help you divide your spending. The idea is to put 50% of your earnings to your ‘needs’ which are things like your rent/mortgage and food. 30% and only 30% goes to your ‘wants’ which might include tickets to a concert or your next holiday. Finally, the last 20% should be going into your savings account, preferably your untouchable!

Consolidate your credit card

If you’re looking to save money on your credit card, paying down your debt and consolidating your debt is the number one way to improve your financial position.
Many people find it easier to pay off their credit debt when they consolidate their credit card debts into one. However, there are a few things you definitely should consider if you’re looking to consolidate credit. Here are some things you should definitely be thinking about:

Remember to read the fine print!

Check your credit payment due date and make sure you pay before then to ensure you don’t get charged hefty interest fees or even late payment fees from some lenders.

Important to stay on top of your taxes by paying them correctly and on time to avoid any penalty fees.

Set up a BPAY from your savings account to your credit card. Calculate how much you need to pay off each month and have it come out of your account onto your card automatically then you don’t even have to think about it!

Maximise your repayments

Try to pay more than the minimum repayments each month so you can pay off your credit card as quickly as possible. The longer you leave your debts, the more they will grow with interest.
It’s also worth finding the lowest interest repayment plan.

Key things to remember when you’re starting out

1. Save money on your credit card

Being financially fit means making the most of your resources. We often think of credit cards as being one of the main reasons people get into debt but it’s not always the case. Your credit card can also assist you with saving.

If your credit card interest rate seems unreasonable at the moment, you might be able to save by finding a bank that offers lower interest rates and fees for paying back debts.

Research and compare to find which credit card is right for you. Always read the fine print so you don’t get caught out by any hidden fees.

2. Make a money motto

Keep your head in the game! Try not to fall off the rails when it comes to your finances. Your mindset matters. It can be the difference between having financial stability and not. You might benefit from having a motto to stick by. How about this one: If you can’t buy afford to buy something twice, you can’t afford to buy it.

3. If you need advice, seek it

To be financially fit you’ve got to reach out for support when you need it. Speak to friends, family or even financial advisors if you feel like you need some help. Like everything in life, we’ve always got more to learn. Just remember that no bank, partner or advisor is going to make things happen for you. The responsibility lies with you.

4. Stop putting off your life insurance

It’s obviously not something we like to talk about but should something happen to you or your partner, it’s important to have in writing who you would like your assets to be passed on to. We spend our lives accumulating our assets, so when writing your Will, be sure to include the names of your beneficiaries.

Looking for more ideas?

Enjoyed reading about how to become financially fit? Check out the Nifty Loans blog for more on topics like this, including ways you can build your emergency savings fund.

Nifty Loans offer quick and easy solutions to any concerns you may have with your financial situation.