Tuesday, November 19, 2013

Tips for Testing your Financial Fitness

You have doctors to tell you how your insides are doing, and physical trainers to tell you how your outsides are doing, but who is there to tell you how your financial fitness is doing? You could put yourself in the hands of a professional financial consultant, but that can get expensive quickly! Fortunately, finding out whether you’re a financial weakling, or a savings superstar really isn’t that tough. A little common sense can really pave the way for you to find your way to financial comfort! What goes into financial fitness? It requires you to have the right insurance products (not necessarily the ones that television commercials tell you you need,) having emergency savings and having your debts under control, as well as carefully monitoring your retirement investments. With these in place, you might end up finding that all your friends will be coming to you for financial advice!

Let’s call it the five primary financial issues that many people don’t really connect together. While they can’t really be lumped together into one big financial goober, you really shouldn’t think about one without considering the others. Insurance, Retirement, Savings, Budgeting, and Investments. They’re all slightly different, but when woven together, provide a strong framework that gets surprisingly easy to handle- much easier and less expensive than avoiding them. They build off one another, just the way that regular exercise has compounding benefits. (The more you exercise, the better you tend to feel physically.) 

Budgeting is the basic framework of a good, solid financial plan. If you’ve built a budget that covers all your expenses and still provides you with enough to put away some money for emergencies, for retirement, and recreation, then you’ve got what it takes to be a financial olympian! Most folks today try to budget their money, but seldom do it in such a way that there’s enough left over to cover savings and retirement, as well. This really is a shame, because budgeting is really like stretching before a workout. You might get something done, but without doing it, you just might find yourself getting hurt in the end.

With a solid budget in place, you can think about insurance. The big ones are life, medical and vehicle insurance, and all three of them are extremely important in your financial life, but it’s also critical that you not overspend for them. Basically, it comes down to not falling for the hype. Life insurance is built on fear marketing, so you really have to know what you’re getting into before you buy. Car insurance is mandatory, but few of us haven’t ever used it, so it does pay to play the field and find the best deal you can. Health insurance is about to become mandatory thanks to the affordable care act, but don’t believe what politicians tell you about it. Take the time to read about the act and see how it really affects you. So many political decisions are made with emotion, rather than reason, that it’s a wonder anything gets done in Washington, and If you didn’t read that as sarcasm, you might be listening to the politics just a tad too much.

When you’re protected and budgeted, the next step, and arguably the most important, is to get saving. Emergency savings, basic savings, and retirement savings. Get yourself enrolled in the 401-k program where you work, right now if you can, because if your company matches and you’re not enrolled, you’re basically turning down a raise that they’re trying to give you. Emergency savings is just as critical, but is used for near-term things like paying the deductible on your auto insurance, paying for medical expenses that aren’t covered by insurance, but if you want to go buy that special something you’ve been wanting to get, or you’re out Christmas shopping, and find something really, really great, than basic savings is much, much better to use than credit, even if credit is easier! 

You know how getting exercise helps you feel better and protects you from injury, right? The same thing goes for getting financially fit. It might be a little tough at first, but once you get going with it, once you get over that initial “Holy cow, this is gonna hurt,” you’ll find yourself feeling great in the best financial shape of your life!

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