December 27, 2021
Just like getting your body into shape, becoming financially fit works best when you have a clear strategy and a clear goal. Minimizing your debt, developing a budget, managing credit cards, and having healthy savings are all excellent goals; however, without a clear path and a definable endpoint, you are more likely to find yourself floundering along the way. Additionally, a realistic and measurable goal for what it means for you to have good financial fitness can be a strong motivator and let you see how close you are getting to the ultimate, financially secure reward.
Your Workout Plan for Financial Fitness
Like with an exercise regime, a workout plan is needed to achieve peak financial fitness. Here are some things to consider:
Build a Budget
The first step in building your budget muscle is to take a proper look at your expenses. For one month, make a record of every expense and purchase you make no matter how big, small, or random it may seem.
Mark off which of these items are "needs" and which are "wants." Ideally, you should still have some money left over that you can keep as savings. If you don't—and you may not, hence the need for a budget—work on paring down your wants until you have more of a financial buffer in place. You may find that some of your wants can be delayed more than they have been or that some needs have more affordable variations.
Teach Yourself to Save
A key thing to keep in mind about savings is that little things can mean a lot. For instance, if you eat out a lot, all those restaurant bills are going to be taking a bite out of your budget. You can find ways to save by looking for another restaurant with even slightly lower prices, cooking for yourself, or even buying pre-packaged meals from the grocery store.
Use your budget to plot out potential savings and compare alternatives to find the options that work best for you. Another way to help save is to use cash as much as possible—this gives you a more tangible feel for your money and makes it easier to realize how much you're spending.
Get a Healthy Credit Score
If you had the money to pay off your credit card debt, you likely would have already. Instead, rank your card payments by interest rate and focus on paying off the fastest-growing ones first. Look at your budget and see how much extra you can put towards paying off your balance. When you speak with your credit card company, perhaps to discuss ways to lower your interest rate; try to plan out and write down what you want to say beforehand. Keep card use minimal, always make the minimum payments, and look at your credit report to find ways to improve your overall credit score.
With online banking through LUSO Federal Credit Union, it’s easy to monitor your credit score on your computer or mobile device. Our Credit Sense tool gives your access to your credit score and report, credit monitoring and personalized money-saving tips, all at no cost to you. Credit Sense credit scores are based on a soft pull of your credit and will not penalize you for review.
Slim Down Your Debt
Much like with a credit card, rank your debts by interest rate and payments while making sure you understand the timeline and whom you owe. Spreadsheets can help you stay organized with this since it is really important not to forget what you owe.
Check your credit score and, if possible, speak to a LUSO member service representative so you can learn ways that debts can be refinanced for better terms and more manageable conditions.
Plan Your Rewards
Incentives are great ways to stay on track with your finances and rewarding yourself is great encouragement. The exact reward that works is going to differ from person to person. You might find an annual vacation to be a good goal to save towards, or you might find monthly nights out with friends to be something worth ensuring you are financially fit to enjoy.
Alternatively, simple conveniences like having the money to get food delivered or a new gadget every now and then might be all the encouragement you need. Obviously, you should still look for savings in these areas when you can, but there should be a point where you can say, "I want this, I have the money for it now, so I'll enjoy it."
Remember: It's a Monetary Marathon
Financial fitness is not a short process and, like actual fitness, once you achieve it you need to maintain it as well. Many of these tips—whether building a budget or managing credit card debts and forming savings—boil down to simple habit building. It can be a bit harder in the early stages, but over time you will find it easier and easier to make the smart decisions that lead to financial fitness.
You don't have to make the journey alone, either. Talk to local credit bureaus or financial institutions like LUSO for more options on how to build savings, manage your budget, and more. LUSO Federal Credit Union is a member-owned, not-for-profit that provides key financial services to Hampden County residents. We pride ourselves on helping people achieve their financial fitness goals. Feel free to contact our Ludlow or Wilbraham branch toll free at 1-844-LUSO-FCU.