8 Steps to Living a Financially Healthy Life
Can’t sleep at night? The source of your nightmares might be the deteriorating state of your
finances. If you’re one crisis away from insolvency, or already there, you need to start making
changes to your lifestyle.
Everyone needs a nest egg, investments in the future and spending discipline. Think of them as
jumping jacks for your wallet. Let’s examine some exercises that build financial muscle and
reduce monetary fat.
1. Run away from the credit card. The only way to save and invest is to spend less than
you earn, whatever that is. Some spending is the equivalent of a financial Twinkie: it’s
decadent in the moment but clogs your financial arteries. Every time you find yourself
considering an expenditure, ask yourself if it’s more important than securing your long
term fiscal health.
2. Bench press “bad” debt. Like cholesterol, there is good debt and bad debt. Good debt
carries a low interest rate or tax deductibility and can actually increase your net worth.
High-interest debt is bad debt. It reduces your net worth and should be paid off ASAP.
This includes credit card debt, payday loans and car loans.
3. Pump up your emergency fund. A rainy day fund is the insurance policy against
unexpected bills, like medical care, damage to your property, pet costs, or unplanned
travel. Financial advisors recommend we all keep at least six months of living expenses
safe and liquid – such as in a savings account or certificate of deposit. Less than that can
keep you up at night.
4. Get in the retirement savings habit. The way to save for retirement is the same way to
build muscle – a little bit every week. Put aside money for retirement starting as soon as
possible and add contributions regularly – whether through an employer-sponsored
plan or your own IRA. By the time you retire, you’ll have a nice fat reserve.
5. Make a budgetary workout plan. With a budget, you’ll always know how much you
have to spend – and not spend. And, as with a diet, if you indulge on one expenditure,
you’ll know you need to cut back on another.
6. Audit your credit report. By law, you have the right to a free copy of your credit report
once annually. It’s like your annual physical, except you don’t need a doctor. If there are
any inaccuracies in the report, challenge them. That will improve your credit score and
reduce your cost of borrowing.
7. Karate-chop your spending. To improve your physical health, you might cut out some
fatty snacks. To improve your fiscal health, cut out the fatty spending snacks. Bag your
lunch for work and save ten bucks-a- day. Skip the fancy coffee and just bring a cup from
home. Be strategic about using coupons, and waiting to shop during sales. Cut down on
alcohol when you go out. Shop at the Habitat ReStore or other bargain-priced outlet.
You can probably think of a few belt-tightening ideas of your own.
8. Skip the get-rich- quick schemes. Millions play the lottery and only one or two win it.
Just as it takes time to lose weight and get into shape, it takes time to build savings and
reduce debt. Take the long view.
The bottom line is, well, your bottom line. Building muscle and reducing fat in your financial
plan can help you reduce stress and live a fuller life. It just requires a little discipline and a lot of