Financial Fitness

While there is much focus on physical well being in our society today, the topic of financial well being is somewhat taboo. I don’t know of too many clubs where people gather together to work on their finances. Nor have I heard people in the company break room comparing their financial goals and “recipes” for success. In fact, Dr. Barton Goldsmith, an award winning psychotherapist, syndicated columnist, and radio host stated that, “one subject that many couples find harder to talk about than sex is money”. The topic of finances is just that intimate and private.

So how does one approach financial fitness? Physical fitness focuses on nutrition and exercise. The focus for financial fitness is cash flow and asset accumulation. Financial health requires your expenses to be less than your income. Budgeting is like your meal plan, with the purpose to ensure your lifestyle has its basic needs met, much like a diet meeting your basic physical needs.

Next you need to identify your short-term goals, such as buying a home, and your long-term financial goals, such as your lifestyle in retirement. The financial resources for these goals must be built and strengthened over time just as it would if you were to build physical strength and endurance.

Lastly, you should periodically benchmark your progress to see if you are on target and if your goals are realistic. Financial measurement tools might include your net worth (your assets minus your liabilities), or your debt to income ratio (often used in the mortgage loan business), or perhaps use a tool like INGCompareMe.com to see if you are doing better than the “average American”.

So to recap, your financial fitness can be achieved by managing your cash flow (financial diet), strengthening your resources (financial muscle), and benchmarking your progress to keep you on track.