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Improving your financial fitness

If we are physically fit, we feel better, can manage stress and are able to enjoy life. We can experience the same benefits when we are financially fit. Similar to getting physically fit, getting financially fit takes effort but the benefits are well worth it. Here are the steps to improve your financial fitness whether you are starting or just toning up:

First, take some time to figure out what you want to achieve. Paraphrasing the Cheshire cat in "Alice in Wonderland," "... if you don't care where you want to go, then it doesn't matter which way you go." Many people find it helpful to visualize their goals by imagining what occurs when they reach their goals. For example, what do you envision for your retirement? Where will you live? Will you work or volunteer? Golf? Garden? You can take these visions and goals, and identify concrete actions and a schedule to achieve them. One method is to set SMART (Specific, Measurable, Attainable, Realistic and Timely) goals. There are many free resources using this process on the Internet or I can give you some references.

The next step is to figure out where you are today. If you were starting a physical fitness program, you would consult with a doctor to avoid overdoing it. For your financial physical, start the lab work by calculating your net worth, cash flow, debt and savings ratios. The recommendations and prescriptions come from comparing to others of similar income, age and situations to see how healthy you are. You can get some local comparison information through your financial planner or by searching AARP, The Millionaire Next Door or

Now we know where we want to go, where we are starting from and what condition we are in.

Here are some areas to cover and tips for your fitness plan:

Build good habits

Don't procrastinate. Put time on your side by starting to save, invest and control expenses now.

Keep your goals in mind. Watch out for temptations that destroy your plan. Get support from friends and trusted professionals. Celebrate your successes!

Plan for life's surprises

Build an emergency fund that will cover six months of your basic expenses. Keep this in liquid investments.

Protect your assets. This includes your ability to provide income. Are your loved ones covered if you can't provide income for them? How will you cover potential large expenses such as medical/long term care or damage to your home? If you are not insuring, you must put money aside to avoid destroying your plan.

Live within your means

This is the path to financial success. Doing so means you will have money to save and stay out of debt.


Focus on what you can control. Write down everything you spend. Shop with a purpose and a list. Control impulse purchases by converting the cost into number of hours of work. (If you earn $25 per hour and the cost is $100, is it worth four hours of your time?)

Another way is to delay purchases based on the cost. For example, if you are spending $100 on a discretionary purchase wait 24 hours. On $500 wait one week. This will give you time to consider if it is really worth it.

Buy used. Used cars and other items can cost much less than brand new, even if hardly used.

Use a system. Use whatever works best for you; paper log, envelopes or electronic programs. If is easy for you and gives you the information you need, that is what matters.

Take control of debt

Avoid taking loans or paying on credit for items such as vacations, entertainment or items that depreciate.

If you must take a loan on a car, after the loan is paid make the same payments to your car fund. This will reduce or eliminate the next car loan.

Pay off your credit card balance each month. Always. If you can't, get help before the debt gets overwhelming.

Be realistic about savings and investments

Don't expect investment returns to make up for lack of savings. See the first item, get started now.

If you are not saving 10 percent of your earnings, you are probably under saving. If you started late, it needs to be higher.

Getting physically or financially fit takes work and discipline. Once you get in the habit of managing your finances, your stress level will go down and you can start to enjoy life more. Check for more ideas and tips.

Tom Roberts, a financial planner and the owner of A New Approach Financial Planning in Lakewood Ranch and Sarasota, can be reached at (941) 927-9590 or via email at