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Achieving Financial Fitness

“Finance is not merely about making money.  It’s about achieving our deep goals and protecting the fruits of our labor.  It’s about stewardship and, therefore, about achieving the good society.” — Robert James Shiller is an American economist, academic, and author

What is financial fitness?  Using the artificial intelligence of Chat GPT you get this definition:

“Financial fitness refers to an individual’s ability to manage their finances effectively and efficiently, maintain financial stability, and achieve their financial goals. It involves having a good understanding of personal finance, making informed decisions about spending and saving, creating and sticking to a budget, reducing debt, and investing wisely. A financially fit person is able to make their money work for them and adapt to changes in their financial situation, while still maintaining a comfortable standard of living.”

Wow!  I don’t think I could have defined financial fitness any better.

Below we consider six principles that will help you get into financially fit shape wherever you find yourself in life.

6 principles for financial fitness

  1. Set goals. If you don’t have concrete financial goals, both shorter term and longer term, reaching some level of financial fitness becomes much more problematic. A short-term goal you might consider is having three to six months of cash in an emergency fund. Long-term goals: college savings for your kids and saving for retirement—at least 10% plus a company match.
  2. Know how you spend your income. If you aren’t tracking expenditures, you won’t have a holistic picture.  You might be surprised at how much you spend on eating out, on entertainment, and even on a daily habit of barista-prepared lattes. 
  3. Don’t let your lifestyle exceed your income. If it does, you are burning through savings or taking on debt, and your stress level will reflect it. Excessive spending is not a path that leads to financial fitness.  You want financial space in your life.
  4. Invest wisely. A diversified portfolio that crosses the investment spectrum can reduce risk and enhance your return over the long run.  “Don’t look for the needle in the haystack. Just buy the haystack!” advises John Bogle, founder of Vanguard. In other words, diversify!  We are here to assist you with that.  Accumulation of wealth over a longer period is our goal. We believe it should be yours, too.
  5. Enjoy your retirement. Many enter retirement after accumulating wealth over decades.  They have learned how to save.  For some, suddenly relying on that savings rather than earning income from labor seems like a daunting leap, one they may be ill-prepared to make.  After retirement, your tolerance for risk (losing money) may change. 
  6. Protect your assets. Do you have life insurance, health insurance, and personal liability insurance?  Do you have a will and estate plan?  Who are your beneficiaries?  What happens if you become disabled?  Do you have a trusted advisor to handle your affairs?  If you own your home without a mortgage, do you have homeowners’ insurance?  Surprise, not all do. If you rent, renters’ insurance is cheap.  It’s a must-have item.

Those who fail to put sound principles into practice are like those who build their homes on sand. The rains come and the winds blow, and financial misfortune overtakes them.  Wisdom encourages us to build our homes on a solid financial foundation. Though the rains come and the winds blow (and they will), the house and foundation are designed to withstand the financial storms. 

Having said all that, we never want to give the impression that you are all alone on a financial lifeboat. We are always here to assist.

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