Where are you in your Financial Fitness journey!

  • 4 min read

So what is financial fitness? It simply means being aware of your financial needs and being able to meet your current and long term financial needs smoothly.

As with any form of fitness, to achieve desired results we need to have discipline , determination and not to forget the desire to be financially secure in the long run. Financial independence is the key to a successful living.

A few tips to keep in mind while you embark on your financial fitness journey:

Decide your Financial goals

Like in any activity, you need to be clear as to what you would like to achieve and what is the time span by when you would like to achieve the same basis the resources you currently have.  For example, you need to list down what are the “must spend” financial obligations, the assets you would like to acquire and what age, what

are the leisure activities you would like indulge in and how much emergency fund would you like to create both for short term and long term.

Track the inflow and outflow

1. Remember always - Beware of little expenses, a small leak will sink a great ship!

My parents used to follow the practice of religiously jotting down the monthly income and expenses and had a clear view of the expenses for the month. Many of us think that this practice needs to be followed only when we have limited income. However, that isn’t the case – even if we have sufficient income at our disposal, it is still important to have a visibility on the monthly regular expenses and the actual spend each month. List down all the necessities, set aside a budget for leisure activities and savings. In the current environment with the flexibility to use various digital modes of payment such as credit cards, payment wallets etc it is becoming very difficult to keep a check on the money spent on a daily basis.

Having said that, the same digital evolution has also enabled us to monitor our spend electronically - there are several apps that help you do this through the convenience of your smart phone, there are electronic spread sheets that you can update daily. Several banks also provide a monthly dashboard of inflow and outflow of resources. A quick look at some of these dashboards will have you understand where you could curtail your expenditure. So set aside some time at the end of the month to review your expenditure and track your progress towards your goals.

2. Monitor growth of your savings

Set a target for yourself – say as a beginner you would wish to save 10 lakhs over a 5 year time frame. Several bank accounts allow you to set up an account with goals like I-wish accounts and will guide you on how much you need to contribute every month to achieve the goal. Use the sweep savings account to earn interest while maintaining the flexibility to withdraw as required. Judiciously set aside funds from your annual bonus to add your fund. Most importantly, first set aside the minimum savings that you have decided and then spend with the rest of the income and not vice versa.

Be aware of the retirement savings options and regularly invest towards the same. Let me remind you the emergency funds are separate from the retirement funds. So you need to set aside sums for both right from the start, irrespective of any age group that you currently belong to, though the quantum can vary as you grow older and wiser!

Think twice before using debt and the extent of debt

Indulge in debt only for long term assets and goals and consider the tax benefits before deciding the amount and tenure of debt. Avoid personal loans and high interest debts such as credit card loans. Repay the debt in a timely manner and don’t skip repayment instalments. Several banks provide the facility of an overdraft facility where you may park your excess funds temporarily and save interest payable on the monthly instalments.

Do remember to ask your banker/lender if they provide this facility.  General rule of thumb is that your debt should be lower than 3 -5 times your gross income or monthly repayments should be less than 40% of your monthly income. If you are a young working couple and belong to the risk averse category , another yardstick one could follow is that you should be able to meet the debt obligations even if one of you is working at any point in time.

1. Be financially aware

Invest in a diversified portfolio and keep a long term goal in mind. Several good funds fetch you good returns in the long run. Read up on the financial markets, review your portfolio regularly to spruce and prune the portfolio to align with the changing trends.

2. Maintain a sustainable lifestyle and yes do set aside funds for leisure!

Lead a lifestyle which is sustainable even when you have a stretch on your finances. It is also equally important to Live life and enjoy as it lasts, so do set aside some sum monthly for your annual vacation, hangouts with friends, dinner dates, that lovely piece of jewellery you dreamt to purchase, gifts for your loved ones etc. Life is not just about savings but having fun as you as you build your safety net!

Financial fitness is not just about saving for a rainy day, it is about meeting all your needs, wants, desires and saving enough to lean on when you have a drought! So, are you all set to commence your financial fitness journey?

Note - The views presented above are purely personal and is not a professional advice.

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Experienced finance professional
I am an experienced finance professional and love exploring my creative side and reinventing myself all the time.
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