Are You Financially Fit? 6 Ways to Tell—And What To Do If You Aren’t

Financially fit

Being financially fit is the key to success. However, it’s not an easy task to become financially fit. Money is such a personal thing, and sometimes it’s hard to manage, but it’s a worthwhile goal to get your finances in shape and choose financial fitness for life.

But how do you know if you are financially fit, and how can you achieve it if you are not on track? Let's dive into the financial fitness meaning, the signs you are financially fit, and what to do if you aren't!

What does it mean to be financially fit?

Financial fitness meaning can vary from person to person, but most of us would probably agree that losing financial stress is a great start. However, being financially fit means your finances are healthy!

For instance, you have a firm hold on your finances by budgeting, saving, investing, and improving your knowledge on personal finance topics.

But if you ask 100 women what they believe the meaning is of financial fitness to them, you might get 100 slightly different answers. Some may focus on debt, while others want to send their children to college.

Plenty of women may be really just hoping to stop living paycheck to paycheck. With that being said, let's dive into signs your finances are in good shape and what to do if you are trying to improve them.

6 Ways to ensure you are financially fit: Plus tips on how to whip your finances into shape!

So, are you financially fit? Check out our list to ensure your finances are in good shape and what to do if you need to work on them a bit so you can get on the path to financial fitness for life!

1. You are committed to improving your finances

Being committed to always improving your finances is the first sign you are financially fit! Your life is always changing which means your financial situation is too.

You realize this so you do things like regularly review your budget, keep track of your spending, and know exactly where you stand with your net worth.

Doing your best to have a firm grasp on all of your finances is key in terms of how to keep your finances fit. Here are a couple of tips on how to do it if you aren't exactly as "fit" as you'd like to be with your money!

Create a budget that works for you

Budgeting is the secret to achieving financial fitness for life. Even for someone who makes a six-figure salary, budgeting can be a crucial element of financial fitness. Although not everyone needs a to-the-penny budgeting method, some form of a budget is an excellent start in becoming financial savvy.

In a nutshell, budgeting is a means of organizing your income and expenses. At its most basic, you want to allocate your income appropriately to meet all your spending needs each month.

Why is budgeting so important in financial fitness? Even if you adopt a fairly loose budget, it can ensure you don’t overspend. Without knowing how much money you’re earning and spending, you don’t know how much you can save.

You can check out these budget categories and methods for an overview. Or try a budget with percentages built-in, like these:

The 80/20 Rule

The 80/20 rule is one of the simplest percentage budgets to follow. This is where you use 80% of your budget for needs and wants, then save the other 20%. Rather than having a variety of categories, you simply divide your expenses and savings into these two buckets.

The 70-20-10 Budget

With the 70-20-10 budgeting method, you spend 70% on your wants and needs, save 20%, and 10% for gifting.  If you have debt, you can replace the 10% for giving and allocate it towards your debt payoff plan.

The 30-30-30-10 Budget

The 30-30-30-10 Budget is another popular method you can try. This budget breaks down into 30% housing, 30% expenses, 30% debt/savings, and 10% for entertainment/fun.

So figure out the best budget method for you and get started!

Calculate your net worth

Although the term “net worth” can be intimidating, especially if you’re early in your financial journey, it’s a useful figure to know.

Net worth is different from income. The simplest way to calculate it is by subtracting your liabilities from your assets. Or another way to put it: what you own minus what you owe. Here's how to calculate it:

Total up your assets

As you start calculating your net worth, add up all of the things you own that have financial value. That includes things like the money in your checking and savings, IRAs and other retirement accounts, property, and more.

Total up your liabilities

The second part of the net worth equation is liabilities or debts. Anything you owe money on goes into this number. Credit card balances, car loans, personal loans, and mortgages fit under this category.

Once you know the totals of your assets (possessions with value) and liabilities (debts), subtract the debts from the assets. This net worth figure is simply a number to be aware of as you set financial goals.

2. You set financial goals

Do you make weekly, monthly, and yearly goals for your finances? If you constantly set goals for your finances, it's a sign you are financially fit! Your finances are constantly changing, and it’s healthy to revisit your goals and change them regularly.

If you don't have your goals set yet, don't worry. Here's what to do to get started.

Figure out your financial priorities

A financially fit person has a handle on what is most important in her financial life. It’s tough to focus on a ton of different things at once, so picking one or two aspects of your finances can help.

Figuring out where you are in your financial journey can help you prioritize what’s next. For instance, if you’re still paying off student loans, you might need to hold off on buying a house. Or if you live in a paid-for house, you may be focusing on supercharging your retirement savings.

It’s important to determine what your financial priorities are in order to really tackle problems and issues head-on. And this doesn’t mean you literally only focus on debt, college savings, or 401(k)s, but that you know where most of your energy (and money) goes.

Set goals based on your financial circumstances

After you’ve nailed down your priorities, (and maybe ranked them in order), you can set effective goals. Maybe you want to pay off your car loan, then put the amount you’re paying on that towards a down payment.

It won’t necessarily be easy to set the right goals for your money, but you have the power to put your life in order. That’s why it's important to break your goals down into small steps so you can fit your financial life plans into logical steps.

Whether or not you follow these plans to a “T,” you can learn from having a manner of organizing finances. The key here is to set reasonable goals for the phase of life you’re living.

Financial goals give you something to shoot for so that years from now you’re further along than you are today. Your goals might include setting better money habits or becoming financially independent by a certain age. 

3. You have a plan to get your debt under control

Ah, yes, the big D-word: debt. It’s literally a four-letter word, and for many of us, it fits the description as something really terrible to avoid. While debt is often a necessary tool to get ahead financially, you should try not to remain in debt forever.

So someone who is financially fit may owe debt on their house but have all of their credit cards paid off. Here are ways to get ahold of your debt if you have more than you should.

Add up your total debts

Yes, we already did this in the net worth calculation section. But it’s important enough to repeat! Burying your head in the sand and ignoring your debt won’t make it go away.

You absolutely must know how much you owe across all categories: student debt, mortgage, car, and personal loans, medical debt, credit card debt, and others. For one thing, not knowing the total can add to your debt stress.

Figuring out your total debts helps you to craft a game plan. Yes, it might be painful to look at that total at first. But once you recognize how much debt you have, then you can decide how to pay it off.

Follow a debt repayment plan to become financially fit

There are good reasons that many financial experts focus on debt payoff. Debt can stop you from reaching important milestones, stop you from changing careers, and stop you from preparing for your future.

Once you know how much your debt is, decide on a debt payment plan. If it’s super-overwhelming, you might want to seek debt counseling or budget counseling. Or you can do some simple research and craft your debt reduction strategy.

You might choose the debt snowball, in which you pay the smallest debts first. Or you could use a debt avalanche, where you decide based on interest rates. Whatever debt reduction strategy you choose, just make sure it's easy for you to stick with, so you can achieve becoming debt-free!

4. You are saving money

If you have a decent size emergency fund and sinking funds set aside, that's a good sign your finances are in good shape. Saving money isn’t always the easiest task, but we all have to do it. Savings are essential to financial fitness, meaning you can’t really move forward without some kind of money saved up.

But remember saving a little is better than nothing! So even if you are saving something from every paycheck that's fantastic! If you aren't saving or want to save more, here are a couple of pointers to help.

Set up an emergency fund

Please, whatever you do, if you don’t have any emergency money saved up, that should be your number one priority. Right now. Get yourself a starter emergency fund of $500 or $1,000 by saving whatever you can immediately.

If you’re struggling to save anything, you’re not alone. After all, a recent survey showed that 56% of Americans couldn’t cover a sudden $1,000 expense. This is sobering news, but don’t despair.

To begin, work on saving anything you can, even if it’s just $5 a month. Think of any expense you can cut out, even temporarily, while you build up an emergency fund. This helps keep you from going into credit card debt if an emergency arises.

Plan ahead with sinking funds

Another part of the savings equation, after you have an emergency fund in place, may be sinking funds. These are simply savings that you earmark for upcoming expenses.

Sinking funds typically cover expenses that may happen only once, or once in a while. This could be for an upcoming wedding, a field trip for your daughter, or a family vacation.

You can create separate sinking funds for as many categories as you like. Some of these could be a car sinking fund, a furniture sinking fund, and a holiday/birthday gift sinking fund.

This type of savings isn’t as urgent as your emergency fund. But, if you can do this, it helps ease some of the pressure at certain times of the year. (Saving $50 a month all year for holiday gifts can make December much less stressful.)

5. You are investing your money

Are you making your money work for you? Are you investing for your retirement? Do you contribute to a 401k or IRA? Then you are definitely financially fit! If you aren't investing, here are a couple of ways to start!

Open an IRA

One of the simplest ways to invest is with an IRA (Individual Retirement Arrangement). There are tax advantages to saving in them, and you don’t have to have a certain type of employer to do so.

A traditional IRA is one where your contributions are tax-deductible (they reduce your taxable income). Or a Roth IRA might work better—contributions aren’t deductible, but you might not pay taxes when you withdraw the money.

If you have leftover money after paying the bills and paying down debt, you might try to max out an IRA each year. That money will help you be ready to retire in the not-so-distant future.

Take advantage of employer-sponsored retirement accounts

Another form of investing is with employer-sponsored retirement accounts, such as a 401(k) or 403(b). These accounts offer more flexibility than IRAs in some ways, and the maximum contribution limit is higher.

Although contributing to and maxing out a 401(k) plan might require a higher income, it’s an awesome tool if you can swing it. That money will grow for the next few decades and bring you tax benefits.

A 401(k) is especially great if you work for an employer that offers a 401(k) match. They match your annual contributions up to a certain amount, like 3%, so it's free money to you!

You can read up more on the differences between IRAs and 401(k)s. Both have pros and cons, and you can actually save in both types of accounts if you have the funds.

6. You continue to learn about personal finance

Here’s one last trait that can indicate that you’re financially fit, and always will be. You never stop learning about finances. Learning is not a process that comes to an end; it’s a lifelong process. That applies to your career, relationships, health, and yes, your finances.

So if you are always reading the latest finance book or are constantly following your favorite financial experts on YouTube that is a good sign you are staying informed on all things money.

Always continue your financial education

Throughout each of the previous steps, and through all phases of your financial life, you adapt. You grow and change, and that’s a positive thing.

As you seek to become financially fit, don’t plan on being “done” once you reach a certain goal. While it’s a worthy goal to become debt-free, buy a home, or save half your income, it’s not over yet.

Financial fitness meaning is that you are teachable, and you continue to learn new skills. You might feel really awesome about your finances, and then decide to teach a community class on budgeting. That’ll open up a whole new way of thinking about money.

Whatever you do, keep learning new information and new skills. While certain financial principles may stay the same, there’s always something to learn. After all, the stock market goes up and down, the economy shifts, the job market changes, and more.

Plus, in your personal life, your finances won’t stay the same forever. So read financial books, follow podcasts, and finance bloggers/experts to stay on top of your money game! Don't forget to access our completely free courses and worksheets too!

Adjust your financial plans regularly to become financially fit for life!

It may sound simple, and it actually is. You can be a financially fit person by constantly evaluating your money situation and adjusting it as needed.

There will probably be phases of your life when you live more frugally. You won’t go out to eat much, and you won’t spend on luxuries. But at other points, you might be secure enough to splurge more often or to give more generously to charity.

A financially fit person doesn’t settle for where she is now. Even the most successful of us can benefit from examining our finances from time to time.

While you might not be able to check off every item on this list, you still can still aim to become financially fit. Personal finance isn’t always easy, but you have the tools and the ability to make continuous progress in your financial journey.

So remember to achieve financial fitness for life, continue to learn about finances, adjust your budget and goals as you go, and never give up!

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