With fitness on your mind, what better time to begin thinking about getting your personal balance sheet in order as well? You might be surprised at just how similar finance and fitness really are.
Here are some of the ways:
Spend less than you earn.
To lose weight, you need to burn more calories than you consume. Wealth is accumulated in a similar fashion, where you need to spend less than you earn. Most of us receive a paycheck once or twice per month, making the earning part easy to calculate. Simply multiply your take-home pay (the amount you deposit in the bank) by 26 or 52, depending how often you get paid.
Calculating expenses is far more difficult, because they might be due monthly, quarterly, biannually or annually. For example, utilities and credit cards typically are paid monthly, and property taxes are paid annually. You will need to consider what bills you have on a periodic basis and total them for the entire year. We hope your earnings are greater than your expenditures.
Most people never exercise. Managing your financial affairs requires unending discipline, not much different than physical fitness.
Properly saving for something such as retirement requires a lifelong discipline to be followed month after month, year after year. Calculating your expenses, both in amount as well as what type they are, will be difficult, so prepare your mindset for the task.
Pay yourself first. Many of the best savers follow the mantra “pay yourself first.” Doing so simply means to make savings a regular and ongoing expense.
For example, if you strive to save $6,000 per year, make sure you budget a $500 per month expense. Paying yourself first means that you save this money before you get a chance to spend it on a vacation or at the local mall. Just like making a resolution to hit the gym before work each day, paying yourself first will require your resolve.
Start slowly. If you plan to exercise for the first time in years, you probably will not do so by running a marathon. More likely, you would start slowly and work your way up to your desired goal. Fiscal fitness is no different. Begin saving a small amount monthly, or consider adding money to your company retirement plan. After a few months, you will not miss your savings, and that is the perfect time to increase it. Before you know it, you will be saving more than you thought possible. Wealth is not accumulated overnight; instead, it is a lifelong endeavor, not much different than physical fitness.
What do I do with my savings? Once you prioritize fiscal fitness, you will need to determine what to do with your savings. Your first priority should be to create a slush fund. This simply means you have money readily available to pay for unforeseen expenses such as car repairs or buying a new appliance. When you have ample cash reserves, you can then consider increasing your company retirement plan contributions and/or starting a periodic investment program.
Each marathon starts with the first step. No matter what your long-term financial goals might be, you will never accumulate wealth without saving your first dollar. Many fitness gurus suggest you consult your physician prior to beginning a new routine. Perhaps it makes sense to consult a financial professional to help you on your new journey. Paint the picture of where you want to be and maintain the discipline to make it a reality. n
Paul Marrella is a wealth manager at Marrella Financial Group LLC, with securities offered through Raymond James Financial Services Inc. Marrella is the author of “What Now? The Widow’s Guide to Financial Independence.” Based in Spring Township, Paul can be reached at Paul.Marrella@RaymondJames.com.
