The first step on your road to financial fitness: Figure out where you stand. Though it sounds simple, this core step remains a hurdle too far for many. Checking in on your financial status might seem like something that can wait, but routinely assessing where you stand can benefit you today and much further down the road.
It’s important that you have a clear and accurate view of your whole financial picture and that you feel confident that you will be able to achieve your financial goals. Here are some steps to kick start your year of financial fitness:
Understand where your money goes and know your worth
Do you know how your monthly income compares to your monthly expenses? If you are lucky enough to have surplus income at the end of the month, do you know where it goes and if your accounts or holdings are suitable for you?
There’s always going to be unexpected outgoings that eat away at some of that surplus cash, but if you take time to look through your bank statements (online or paper) you can quickly get an understanding of your spending habits and identify small changes that can improve your situation.
Products, services or utilities that increase gradually each year can slip under the radar. Have you shopped around? Are you getting the best deal? Do you still need the product or service – an unused gym membership perhaps?
Think bigger picture too, consider calculating your net worth by adding the value of all your assets and subtracting your liabilities. You might be pleasantly surprised by the figure in front of you, but if not, remember that this is your starting point and it’s never too late to make a change.
Budget and set goals
You may be tired of hearing it, but that’s because it’s true: it’s crucial to set up a budget for you and your family. Before you spend on anything, whether it’s that new pair of shoes for yourself, or that ‘must-have’ toy for your child, consult your budget and see if you can afford it or not.
Think about your short, medium and longer-term goals. Traveling more often is a popular short-term goal when a new year starts. Although many don’t think of traveling as a money goal, it is - it takes money and discipline to travel.
You can apply the exact same logic to any other goal or aspiration; set the goal, set a budget and set a date. Once you have those three details, you can work on regularly savings money for the goal.
Setting goals for significant life events such as retirement isn’t as straight forward, and it would stand you in good stead to make use of the services of a qualified financial planner, who will help you navigate the complicated world of financial planning. We are all unique and our financial plans should reflect that.
It’s important to assess the type and amount of insurance you need; your assets can end up costing you lots of money if they’re not adequately protected with the right kind of insurance. Make sure that you have appropriate short-term insurance on all your assets, such as your car, possessions and home.
Don’t forget about yourself, make sure that you protect your health and that of your family if you fall ill and need medical treatment and make sure you have the means to provide an income if you are no longer able to work.