Becoming financially fit is not much different than becoming physically fit.
In order to do either, for starters, you have to have the right mentality. Second, you have to get rid of all your bad habits and begin developing good habits.
To lose weight, you have to make a commitment to east less high-calorie, fattening foods and make time to exercise at least 4 to 5 times a week.
If you want to become financially fit, meaning you are no longer living from paycheck to paycheck, you spend less than you earn, you have money to invest, and you have assets that are working to make you more money, then listen closely.
Here are 8 things you need to do to become financially fit
- Admit to yourself that what you’re doing isn’t working. You’ve tried every financial fad and diet that’s come along, every get-rich-quick scheme and the lessons you learned from your parents. The reason you’re reading this article is that none of that has worked. So, in order for you to be successful, you’re going to have to throw those old strategies away.
- Identify your economic drains. Do you understand the difference between an asset and a liability? Are you wasting money on things that don’t add value to your life? Are you making poor financial decisions? To fix this problem, you must first identify the root cause of your problem and those things that are draining your cash.
- Make sure you have adequate life insurance. I can’t stress this enough. One of the best ways to ensure a legacy of wealth for your family is to have good life insurance coverage. You don’t know when you are going to die. Life insurance policies aren’t expensive. Don’t miss this easy opportunity to pass on easy wealth to your spouse and children. Financial advisors recommend life insurance 10x your annual salary. For example, if you make $40,000 a year, you should have life insurance coverage equal to $400,000.
- Set your savings on auto-deduction. Rather than consciously choosing what to save, make what you save each month automatic and unconscious by using auto-deductions. These are easy to set up with your checking or savings account. Start paying yourself first. Don’t spend first and then try to save what’s left.
- Buy a home instead of renting. Most people assume home ownership is not obtainable without doing their research. There are some really good programs like the Neighborhood Assistance Corporation of America (better known as just NACA) that can help you get a low-interest rate and an affordable mortgage. There are also pathways to credit repair, savings, and government assistance that can get you out of the renter’s market faster than you think. Stop paying rent that is essentially helping to pay down your landlord’s mortgage and buy a home for yourself.
- Start investing in the stock market. Studies show that the biggest reason for the wealth gap between the upper class and middle class is stock market participation. Apps like Robinhood can get you started investing with five dollars in five minutes. Investing in the stock market does not require sophisticated knowledge and expertise. When many millionaires invest in the stock market, they like to diversify instead of purchasing select stocks. In fact, their investment strategy is rather simple. They invest in low-cost index funds. Even billionaire Warren Buffett likes low-cost investing, often recommending Vanguard’s S&P 500 index fund for the average investor. He previously called index funds “the most sensible equity investment.”
- Improve your financial literacy. Warren Buffett credits his financial success to reading. Buffett and billionaire Mark Cuban claim to read more than three hours each day. While you probably don’t have three hours a day to read, you have at least 15 minutes each day to read a book that will improve your financial literacy. With just 15 minutes each day dedicated to reading, you can learn to invest like Warren Buffett.
- Learn how to start a business. Spending 10 minutes a day listening to an entrepreneurship podcast can do wonders for helping you figure out how to get out of the corporate rate race. Having multiple streams of income is a great way to engage in quick financial catch-up.
You just learned 8 things that can help you to become financially fit. Given that it took you less than 10 minutes to read this article, I encourage you to re-read it every couple of days to remind yourself of the basic idea.
Building wealth, and becoming financially fit, isn’t that complicated if you develop the right spending and savings habits.