July 06, 2023
It’s 2023 and the price of eggs has tripled in the last couple of years, vehicles have increased by approximately 25%, and the price of real estate has increased significantly. It feels almost unattainable to be in a good financial position in our current economy. However, being financially fit doesn’t mean that you make high wages, or that you can purchase a new car.
Being financially fit means that you are a financially literate person, who is aware of their debt, value of their assets, and their fixed and fluctuating expenses. Let’s look at six strategies that will help you become financially fit.
1. Expand your financial knowledge
Being financially fit means that you take the time to broaden your money knowledge. You may read personal finance books and blogs, attend financial education seminars, or listen to financial podcasts. If you are someone that enjoys learning by playing games, you can try Education First FCU’s partnering app, Zogo, a free Financial Literacy App that allows users to play games, receive financial education, and win real prizes. The app is available on iPhone and Android. Just download the app and use the code EFFCU when you join. You’ll be on your way to learning about budgeting, loans, credit, and even investing!
The key to learning is finding what works for you. If you love to read, reach for the book that will help you get where you want to be. If you have a long commute to work, maybe listening to a podcast would be a good choice for you. BiggerPockets Money podcast teaches listeners how to earn more, keep more, spend smarter, and grow wealth. If you are looking to gain more knowledge in investing, We Study Billionaires podcast may be a good option for you.
2. Budget out your expenses
An important step in being financially fit is knowing how much money you have and how to best use the resources you have been given. Money is a tool, to be used with a purpose. If you don’t set a budget, your impulses and your income will drive you to spend money when you don’t need to. That doesn’t mean that you hoard money to the point of not buying necessities, but by budgeting out expenses you can be assured that every dollar you make is being allocated to something with purpose.
An easy way to keep track of your budget is by downloading a budgeting app on your smartphone. You can set categories of how much you plan to spend in that category on a weekly or monthly basis. Most of these apps will allow you to set savings goals and other long-term goals as well. iThrive is a budgeting tool within online banking that allows you to track your cash flow and spending by category. You can even set up savings goals, manage your overall budget, and more!
3. Minimize Debt
You have probably heard at one time or another that “debt free” is the end goal, and while that might be true, most Americans find themselves in some kind of debt during their lifetime. There are two different types of debt, secured and unsecured. Secured debt is also known as collateralized debt. An example would be a car loan, as the vehicle would serve as collateral for the debt. If you stopped paying your car note tomorrow, it would only be a matter of time before the lender seized your car, to repay the debt. Unsecured debt does not require any collateral as security. The lender decides whether to grant the loan based on a borrower’s creditworthiness, as indicated by their credit score, credit history, and other factors. To minimize your debt, you’ll need to identify your debt and come up with a strategy for paying it off.
- Organize your debt.
The first thing that you need to do is make a list of your current debts. Physically writing them down will allow you to organize them in terms of amount owed, interest rate, and payment due date. Once you have organized them all, now you’ll need to prioritize the payments based on what’s most important to you.
- Prioritize payments.
There are different ways to prioritize payments. The important thing is to focus on a plan that motivates you to keep going. You can use our Meet a Debt Payoff Goal Calculator and determine a monthly payment that will help you achieve your goal.
- Debt Consolidation Loan.
Are you feeling overwhelmed by outstanding debts? Debt Consolidation can combine your debt into one manageable loan. One option would be a personal loan, which would provide an affordable interest rate and a flexible repayment plan for your outstanding debt. Download our Debt Consolidation eBook and understand the different options for consolidating your debt.
4. Maintain a healthy credit score
We understand how difficult it is to make ends meet in our current economy, but the need to maintain a healthy credit score is just as important as ever. There are three major things that you need to be careful of when it comes to your credit score.
- Timely Payments: It is important to make sure that all your payments are not past due. If you are mailing in a check, you’ll need to account for the time it takes for the check to travel to its destination, to ensure that you don’t accrue any late fees or have a negative impact on your credit.
- Credit Card Debt: Find yourself paying for all your groceries with your credit card? It’s easy to get yourself into a habit of charging items to your card and keeping a high credit card balance, but unfortunately this can hurt your credit over time. Experts suggest only keeping a 30% balance in terms of your credit card limit. If you have a limit of $5,000, you’ll need to keep your balance below $1,500 to build your credit score.
- Too many credit applications: The more applications you submit for any type of credit, the more it can hurt your credit score. Each application that causes a hard inquiry on your credit may take a few points off your score.
Credit score is a large factor in determining whether you will be granted any type of loan or credit in the future. If your goals include owning a home, purchasing a vehicle, or starting a business where you will need a loan, it’s important to make sure your credit is in the best shape.
5. Maximize your savings
Saving doesn’t have to be complicated. The easiest way to save is by committing to setting aside a certain amount each paycheck or every month. Once you figure out a budget that fits your expenses and lifestyle, you’ll be able to get an idea of the amount of money you can save for a rainy day. If you could save as little as $25 a week, you could save $1300 a year. This could cover household appliances, car repairs, or other unforeseen expenses. If you could save up to $50 a week, you could save $2600 in a year. With a little planning, you could put away enough money to cover those unexpected costs. You can use our Savings Calcualtors, and start planning your savings strategy today.
One of the mistakes that people make regarding saving is by never increasing their savings when they receive a pay increase. You got promoted and your salary has increased by $10,000 a year, how much are you planning on saving of this extra income? Instead of saving, most people will immediately decide to allocate that money to an extra expense. Try committing to saving a percentage of your income every month and watch your savings grow over the years with every job change or raise.
6. Create the extra income
With the economy where it’s at, you may be thinking that you are surviving and hardly thriving when it comes to finances. We understand that the prices of products and services have skyrocketed in the last year and saving any money right now may not be attainable with your current income. However, some of your goals like retirement and saving for unexpected expenses isn’t something that can wait. Your retirement goals can only be built up through compounding money, and this can only be achieved over many years. The earlier you begin investing in your retirement, the better.
The opportunities are endless when it comes to creating additional income! There are many multi-level marketing companies, also known as pyramid selling, that will allow you to make additional income from the comfort of your home. Just be sure to do your research on these companies and make sure there aren’t a lot of overhead costs, and the commission is fair. You can also enter the retail space by reselling goods. If you think about it, every retail location makes money off the reselling of goods. You can set up an online shop or boutique, find inventory and then resell that inventory for a small profit. If you are good at making or building things, you could consider building furniture, making jewelry, scented candles and much more.
Finally, you can decide to get a part-time job with a local grocery store, retail location, or even remote job. Several large corporations such as Amazon are always looking for customer service representatives on a part-time or full-time basis. Whatever avenue you decide, the extra income could be exactly what you need to start achieving some of those short and long-term goals.
Conclusion
A person that is financially fit has control of their money and is knowledgeable on how to achieve their financial goals. Your income doesn’t determine your financial knowledge or the control you have over your money. There are plenty of wealthy people that allow their wants, and impulses dictate how they spend money, instead of making sure every dollar earned has a purpose. It’s very easy to spend a lot of unnecessary money when you are not keeping track of your expenses daily. No matter how old you are, what stage of life you are in, or what income bracket you fall into, you can be a financially fit person, who is financially literate, and controls their money with purpose. If you need help in planning out your financial future, we have a team of representatives that would love to help you get started.
