How to Make It Your Year of Financial Fitness

Today’s post is a guest post by Tina Roth. Tina Roth is a personal finance blogger and her goal is to help educate and empower people when it comes to managing their personal finance. She is also a firm believer in financial literacy and writes helpful personal finance articles to educate people to secure their financial life.

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Especially around the New Year, many people focus a lot on health fitness. However, while keeping health fitness is essential, equally important is financial fitness. This ensures that when health goes bad, finance is in place to take care of medical bills or other emergency bills. The idea should be to find the tip or strategy which does the trick for you to effectively save and manage your personal finance.

There are number of ways in which financial alertness can be maintained. Some of them are discussed below:

Assets and liabilities:

Net worth is determined by the net assets after considering all liabilities. Assets can include retirement savings, securities invested, cash, savings, car, home and other property as well as any items of value. Liabilities would be home loans or mortgage, car loan, student loans as well as credit card debt. Keeping track of net worth helps maintain proper financial fitness.

 

Make and stay true to a budget:

Any financial professional will tell you that planning is at the heart of true financial health. A budget is a big part of this plan. The budget for the particular period must be made keeping in mind regular as well as ad-hoc matters. Budgets usually factor in items such as existing and planned purchase related monthly installments. Further, a budget should also account for the increase in the price of the items which are usually required. A properly drawn up budget will guide you on investment ability. It also helps identify areas of income or expenses which need attention.

Alertness:

The time to start saving money is now. The moment to begin planning for retirement or a child’s college education fund is now again. Hence, alertness towards potential expenditures and planning for same should happen immediately. There is no ideal time for such things and the prospective change must happen right away. Procrastination only means delaying and losing both opportunity and money.

Measurable and achievable:

It is important that you set a goal which is measurable. This usually requires answers to questions such as the amount of investment and returns, as well as timelines necessary for success. It is imperative that you stay away from Ponzi schemes which promise way too much too early. It is much better to grow at a more measurable pace, than lose everything for the lure of quick improbable gains.

Savings target:

You should focus on setting and securing a savings target. Expenses always have a habit of spilling over. Thus, keeping in mind the annual family income, one should keep a healthy savings target. This is better than being expense centric. This way expenses get managed around the savings objective and enable savings.

Financial professional:

You can also choose to hire a professional who will help handle a lot of the headache and offer guidance. The planner can track and advise on goals and investments. The planner will provide invaluable experience and knowledge, which can translate into better investment returns for you.

Credit position:

You should keep close track of the credit position through a credit report. The report contains information such as history of bills paid as well as credit accounts. An adverse credit score found in these may mean a higher interest rate for a loan later. The report can be sought for a period of 12 months for free from any one of the top 3 companies in this line of business.

Organized:

Financial planning will all fall through due to the lack of organization. It is very important to have all documents organized. They should be kept at one place in a single file. Papers such as that of investments purchased, as well insurance and medical insurance cards and/or bills. All major documents should have backup as well in the form of photocopies.

Beneficiaries and taxes:

It is critical to plan out the amount to be set aside for the your child’s college tuition. Money should also be set aside for taxes considering average earnings and tax payable. You should also check whether all investments have a beneficiary. The wife is usually the default beneficiary in most cases. However, it is best to fill in and submit the nominee form to avoid unwarranted harassment later.

Return fitness and adequate insurance:

The returns from investments should be compared with market returns. Check whether hedge funds would be a better option than stocks. You must also be adequately insured. Term plans or endowment policies – the decision should be taken as per individual financial goals.

Financial fitness can be achieved by monitoring your progress towards the goals continuously. Some of you may also want to take help of popular financial planning tools. In case of any conflicts in choice, you would be well advised to address them logically.

 

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- While I do strive to only write accurate information and dispense valuable advice, I am not a licensed financial adviser. All information is based solely on my personal experience and personal research and should be treated as such. Find out more.