What does it mean to become financially fit?
Question: I have a very stable job that pays me good salary but I can’t seem to manage my monthly expenses and I always run out of cash. I want to start saving for my retirement but I don’t know where to start. Can you advise me? – Mark H by e-mail
Answer: No one likes to admit they have financial issues. No matter how late some people are with their credit card dues, chances are they would still carry on the same lifestyle as if nothing happened until the problem has turned into a crisis.
Money problems like these are too important to ignore. Most of the time, people do not want to think of their financial difficulties to avoid getting stressed. However, denying that there is financial problem developing early on may cause more anxiety in the future.
Are you always waiting for your salary to pay for your monthly expenses? Have you been missing your housing or car loan payments lately? Do you always find yourself running out of cash a few days after receiving your salary? Do you sometimes worry that you will not be able to retire comfortably someday given your financial situation?
If you encounter issues like these, you may need to do some serious fixing to put your financial house in order. Becoming financially fit begins by acknowledging that there is a problem that needs to be solved.
Your current financial situation may be difficult to solve but when you try to break down the problem, you can come up with simple solutions on how to resolve it. Try to follow these steps to start your financial journey:
Establish your financial goal. What is it that you want to achieve this year? This can be about solving your credit card problems, or increasing your income opportunities or saving money for vacation this Christmas. What about your long-term financial goal? Maybe you want to get married soon or buy a new house or car you can use for work.
There is a price to achieve these goals. Make sure these goals are measurable and achievable. Goals are meant to provide you something to aim for. You may or may not achieve it but it should at least encourage you to move onto the right direction.
Take control of your finances. Once you have identified your goals, you need to look at how you manage your money. How much do you save out of your monthly income? How much of your expenses are essential? Try to suspend some discretionary expenses and turn them into savings if possible.
Develop the discipline of saving. You can start slowly by saving a small portion of your income and increase it until you have adjusted your lifestyle to your spending pattern. If your savings is not enough, maybe you can look for sideline to boost your income.
Get someone to help you monitor. This is important to make you feel accountable to your promises. You may get a close friend or a trusted financial planner to advise and give you support. Ideally, you can list down all your goals and develop a strategy plan on how to achieve it and get someone to hold you accountable.
Grow your savings. When you save regularly, you will be able accumulate a substantial savings fund at some point. Your money will not grow by keeping your savings in the bank. You need to invest to make it grow.
But before you decide to invest, make sure that you set aside at least three months of your monthly expenses as your emergency fund out of your savings. You can invest the balance in various instruments such as stocks, money market and other investments that yield acceptable returns.
Always try to motivate yourself into following the discipline of saving and investing. Becoming financially fit does not mean that you make a lot of money from your business or job. It simply means that you have financial freedom.
When you are financially fit, you can afford to spend whatever you want to spend without having the stress of having financial problems later on.
On Saturday, the Registered Financial Planner Philippines is organizing the annual Financial Fitness Forum at the SMX Aura in Taguig City. If you are serious in becoming financially fit, this is your chance to listen and learn from RFP personal finance advocates.
There are various topics that you can learn from the event. How do you automate your savings from your monthly income and make it grow? Should you invest your savings into mutual funds or stocks? How do you make money when the stock market is down? Should you invest in real estate for passive income? What are the investing opportunities in the global market?
As you build your investment portfolio, it is important to also learn how to prepare yourself for retirement and learn the mechanics. How early should you start planning for retirement?
If you are struggling with debts, learn how to get out of it completely and manage those collecting agencies running after you. Rebuild your financial life by getting ideas on how to apply the Sun Tzu’s art of war for personal finance success.
Start saving by learning how to manage your household finances and develop the financial habits that will last. Learn also how to expand your income opportunities by going into entrepreneurship or becoming financial advisor yourself someday.
As you build your nest egg, you also need to learn how to protect it. How do you manage risks in financial planning? How do you protect yourself from rising medical costs when you get sick?
The goal of becoming financially fit is to have the freedom from financial stress. When you have freedom, you can also achieve happiness in life.
Henry Ong is registered financial planner of RFP Philippines. Learn these topics at Financial Fitness Forum 2016 this March 12 at SMX Aura. To register, e-mail to [email protected] or text <name><e-mail> <FFF> at 0917-9689774.
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