Welcome, financial fitness enthusiasts! Today, we embark on a journey to sculpt your wealth and boost your financial strength with “Smart Money Moves: Financial Fitness 101 💪”. Just as a good workout transforms your body and keeps you healthy and your physique in a proper shape these financial exercises will transform your wallet. Are you ready to flex your financial muscles?
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1. Assessing Your Financial Health
We all plan for our future plans and desire some financial goals or to purchase some dream cars but to get yourself to achieve that goal you need to first understand your current financial position and make a plan accordingly. Working to achieve a goal without knowing your current financial situation is just like taking an exam without studying and expecting a top rank 😂.
Evaluate your net worth periodically or study it before buying a new asset or liabilities. Make sure to go through your monthly cash flow statement to ensure that you have more inflows compared to outflows. Review your credit reports and try to maintain a good Credit Score to secure a loan at less interest.2. Setting Financial Goals: Your Money Workout Plan
Like a Gym Trainer who creates a healthy workout plan and diet for you to achieve your fitness goals the same way, you too will have to create a financial plan that is clear, achievable, and flexible. Divide your goals into Short-Term and Long-Term goals and prioritize your goals based on your urgency of need. Instead of getting flooded by thoughts, pen them down on paper and create a roadmap. You can use notion AI too if you like to keep your roadmap as visually appealing to you.
3. Budgeting Basics: The Foundation of Financial Fitness
Many people misunderstand budgeting and they track the transactions of their expenditures. But budgeting is managing your finances and controlling your outflows (Expenditure). Try creating a budget that suits your behavior and your needs respectively.
Tip: - if you are a spender and can’t save enough money to invest at the end of every month? Try Investing immediately as you receive your paycheck the amount you have allotted in your budget for investment. If you still have a surplus remaining, it’s up to you if you want to deposit in the bank or invest it again.
4. Building an Emergency Fund: Your Financial Safety Net
Everyone pays a premium and buys insurance policies to ensure the safety of their family after them. But why don’t we understand that we should have our own Emergency Fund too? Insurance won't fund you if you are fired from a job or unemployed like we saw during COVID-19. At least, try to maintain an Emergency Fund that can fund your household expenses for 6 months to 1 year. Creating a Financial Safety net before taking a huge jump will minimize the damage to your financial situation.
5. Debt Repayment Strategies: Shedding Financial Weight
There are two types of Debts, Good Debts and Bad Debts. A Good Debt is when you utilize your Debt for a good purpose. And the same way Bad Debts are Debts that are utilized to purchase useless assets that have no utility, nor can they make you money. But yes, remember any Debt outstanding for a long period is bad for your Financial Health and affects your savings directly. So make sure you reduce your debt on time or as soon as possible.
TIP: Pay extra installments in a year, if you pay 12 times a year than start paying 13 in a year this will help to reduce your loan amount and significantly safe on interests. Another option is Refinancing your loan with another bank that provides loans at low interest rate. Refinancing fess may differ bank to bank.
6. Investing for Growth: Pumping Up Your Wealth
As we all know Compound Interest is the 8th Wonder of the world, and it has the potential to double or even triple your investments in the long run. You too should make good and optimum use of this wonder and dump your ideal money into a Fund which will be chosen by you after thorough research. For Instance, always make sure to check the AUM (Assets Under Management), Expense Ratio, Sharpe Ratio, and the nature of the fund. Always choose a Passively Managed Fund to harvest sweet and Juicy returns.
Compound Interest takes time to grow your money in the initial years, but the spell of Compound Interest starts working after 15 to 20 years, and this is from where your investments start to grow rapidly. Patience and Discipline are most needed when you are investing for the long term.
7. Savings for Retirement: Your Financial Endurance Training
Having a lemonade in hand on the beach of Hawaii with no tension of money or income after retirement. Do you too want to go to Hawaii to enjoy your Retired Life with family and go on vacations? then make sure you are Saving for your goal from today only. Saving does not mean you should just keep the money aside as inflation will slowly eat up your hard slowly every month. Make sure you invest your savings to let them grow along with inflation. Diversify your Investments in Pension Schemes, Retirement Schemes offered by the government and in Conservative Mutual Funds with 50% to 60% exposure in Equity, 20% in Debt, 15% in REITs, and 5% in Gold.
Tip: Invest in any type of mutual fund but for reference, if you start earning from 25 than your risk-taking ability is good enough and should invest in aggressive funds so if you want to retire at the age of 60 than shift your investment from Aggressive to Conservative at the age of 50 to protect your capital and gain steady returns. After Retirement make sure to switch to regular income funds and you are ready to enjoy your life as retired.
8. Insurance Essentials: Protecting Your Financial Health
Now, let's talk about financial guardianship—insurance. Picture this: just as armor shields a warrior, insurance safeguards your financial well-being. We're delving into the world of shields—types of insurance shields like health, life, and property. Assess your needs, ensuring each facet of your life has an adequate shield. We're crafting a financial fortress, impenetrable and secure.IX. Review and Adjust: Your Financial Checkup Routine
Our financial journey demands regular checkups. Consider this your financial health spa. Set intervals to review, ensuring your financial muscles stay in peak condition. Adjust your strategies as needed, sculpting them to match your evolving goals. Celebrate milestones, acknowledging each step forward. It's not just a checkup; it's a celebration of your financial vitality.
