As many of us have experienced, embarking on a complete overhaul of our health can lead to unrealistic goals and throwing in the towel. The same can happen with financial fitness – an aspect of our lives that can have a major impact on our wellbeing, both now and in the future.
Improving your financial fitness isn’t simply about generating more cash, it is about laying good foundations. And like exercise, the benefits that come with getting your finances under control can do your mental health a lot of good.
It is important to remember that as with any aspect of our wellbeing, we each start from a different baseline and our goals are individual to us. Read on to discover the lessons we can take from fitness that could help us save more, stress less and look forward to a healthier financial future.
1. Make a budget
Just as it’s unrealistic for most of us to simultaneously train for a marathon, cook every meal from scratch, sleep more and start meditating, addressing every area of your finances at once can feel overwhelming. It is also impractical as jobs, families and unexpected setbacks can get in the way.
Making a budget is a great idea and a manageable place to start. Begin by writing down all your income, not just from paid work but from any benefits or other money you receive regularly each month. Then, list all of your essential outgoings (such as rent or mortgage payments, utility bills, groceries and transport) so that you have a clear view of how much of your income your “needs” take up. It is a good idea to look through your credit card and debit card statements to check you have covered everything. If you use apps like PayPal or Revolut, you might want to check those too.
Then look at your “wants” – the items and activities you spend money on that you could live without. Again, going through your bank statements will give you a good (and realistic) sense of what you spend your money on.
“No matter what your financial goal is, it can usually be made easier with a stronger budget,” Mike Barrow, lead financial coach at Claro Wellbeing, told NerdWallet. A former personal trainer, Barrow uses the ‘hierarchy of financial needs’ to make prioritisation easier.
Head financial coach at Octopus Money, Ali Poulton, has a similar approach when advising how to manage money. “Focus[ing] on the daily expenses, reducing debt, [and] establishing that stable cash flow,” she told NerdWallet.
2. Slim down on debt
Having debt shouldn’t be a barrier to financial fitness. In fact, borrowing could be a smart move, provided you’re in control. This means getting clued up on exactly how much you owe, how much interest you are being charged and how long it will take to pay off.
If a big part of your income goes towards paying off credit cards and loans each month and you are being charged high interest rates, clearing your debts before focusing on savings and investments makes sense if you have the means to do so, explained Barrow. And if you have any surplus income, you might decide to make a bigger debt payment each month so you can pay off what you owe quicker, and not lose hard-earned cash to interest payments.
As a general rule of thumb, start by paying off whatever has the highest interest rate first to keep the cost of your borrowings down. If you have multiple debts that you are finding it hard to keep track of, you can seek help from Citizens Advice or a debt charity such as StepChange for guidance on how to make things more manageable. They may even suggest consolidating the debt into one loan.
3. Bulk up on savings
Once you’ve achieved a basic level of financial fitness through budgeting and making a plan to pay down any debt, the next stage is to use any surplus cash to build financial resilience. There are a number of ways you can start this and just like physical resilience, it doesn’t happen overnight.
“[It’s] a lifelong experience that you will have thinking about your financial goals,” said Poulton, who encourages saving a minimum of three months’ outgoings into an emergency fund.
Once you have a buffer in place, you can start to think further into the future and consider longer-term saving and investing, protecting yourself with insurance and making a will.
Saving is always a good idea but how much you save is entirely down to you. “It’s about prioritising what’s right for you at that time versus what’s right for you to save for the future,” explains Poulton.
4. Look in the mirror (not at everyone else)
While it can be motivating to take inspiration from others, constant comparison can sap our energy. Making judgements about others’ financial wellbeing based on the money moves we see them make can also be unhelpful; how much someone spends when they’re out is not a reliable indicator of how healthy their finances are, for example.
Comparison culture is very normal, but can be very dangerous, said Poulton. “Comparing yourself is so natural, we all do it, but think about your core values and what’s important to you,” she said.
While you may already have a clear idea of what is most important to you in terms of where you spend or save your money, you could also consider seeking help from a coach or financial adviser to help set financial goals specific to you and your life.
5. Don’t go it alone
Just as a gym buddy can keep you on track and make exercise more enjoyable, an ‘accountability buddy’ could help to support your financial fitness. However, Poulton recommends caution when we’re offered financial advice from someone who isn’t qualified, however well-intentioned they might be.
Opening up about your financial goals to get your mates onside could help you socialise without unnecessary spending. “You might find that they’re in exactly the same position as you anyway, so you can help each other out,” says Barrow. “Rather than going out for drinks or for dinner or whatever it is, you can pop around each other’s house and spend zero and still see each other. [You can] basically come up with activities knowing that you’re both trying to save money,” he concludes.
As we head into spring, swap a hefty bar tab for an evening walk with a friend. Whether you talk about money or not, it costs nothing and is great for your health.
Image source: Getty Images
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