As important as it is to monitor your health, it’s also beneficial to keep up with your financial fitness. Your financial fitness determines how much your financial status impacts your day-to-day life, how on track you are towards achieving your financial goals, and if you’re able to cover emergency situations. Just like how you would make a plan to improve your health, maintaining your financial wellness also requires hard work.
Consider following these habits to keep your financial fitness routine in top shape.
- Assign a Purpose to Every Dollar
By assigning a purpose to every dollar, you’ll have a better idea as to where your money is going — keeping you on track with your budget. If something isn’t adding up correctly at the end of the month, review your accounts for budget slip-ups and reallocate as needed. - Build Emergency Savings
Your emergency savings fund is your safety net for unforeseen circumstances, such as a big medical bill, home or car repairs, and unemployment. This fund should be kept separate from a long-term savings account, and should be accessed when necessary. To help grow the account, consider treating it like another bill or automatically transfer money into the account each pay period. - Pay Off the Lowest Bill First
A popular method to paying off debt is to start with the lowest balance first, and then make your way to the largest balance. When you’re done paying off the smallest debt, the money that was allocated to that debt gets rolled into the next smallest balance. By seeing the results as you check off each debt balance, you’ll be more likely to stick to this game plan. - Contribute to Retirement
If you’re not contributing to a retirement plan, try to start as early as possible. The earlier you start, the more time your money will have to grow with compound interest. And as much as we would like to think that we will reach the retirement age with no hiccups, your earning years could potentially be interrupted by layoffs, illnesses, or accidents. The easiest way to contribute to retirement is through an employer retirement plan. If this option is available, be sure to contribute enough money to get the full company match. If you don’t, you’re walking away from free money! - Determine if You Have the Right Insurance
It’s important to assess the type and amount of insurance you need once a year. For example, your homeowners insurance policy should cover the cost to rebuild your home, as well as the cost to replace your household items. Also, if you have a life insurance policy, try to meet with your financial advisor annually to review your coverage, especially if you’ve gone through any life events since your last visit, such as marriage/divorce or the birth of a new child. Be sure to update your beneficiaries, if necessary. - Check Your Credit Report
Knowing where you stand with your credit score can help you determine if you need to take steps to improve it or steps to maintain it. You’ll also be able to see how your financial actions impacted your score, such as when you opened a new credit card or paid off a balance. Checking your credit score through a credit scoring service won’t impact your score, and you’re even eligible to receive a free copy of your credit report every 12 months through annualcreditreport.com.
