Exercising Your Way To Financial Fitness

Exercising Your Way To Financial Fitness 07 08 2014Summer’s here and everywhere you look there’s another ad to get your body beach-ready. Washboard abs and perfectly-toned limbs, here we come.

But how’s your financial fitness? If it’s a little saggy in the middle, maybe your financial physique could use a little attention too. A few essential ingredients—and tending to healthy money life habits—will enhance your fitness and ratchet up your happiness.

It starts with understanding your Cash Flow—money in and money out. What is coming in each month and what does it cost to run your household? We’re not talking entertainment and vacation, but your housing, food, medical and life’s basic needs. Becoming financially healthy means knowing your numbers. Understanding what you make, save and spend provides the basics for making good decisions.  You can derive a high degree of comfort from having a handle on your finances. Knowing your numbers is like going through a pre-workout routine of stretching and foam-rolling out the knots—once you get everything properly aligned, you can proceed into building muscle in your financial life.

When you get ready to bust into a muscle sculpting weight-training session, you make sure your sneakers are tied, your gloves are fitting snugly and your equipment is in good working order. It’s the equivalent of managing your risk. Risk management, like many other areas of financial planning, can be tricky and require specialized help in navigating. You need to evaluate decisions—like how much life, disability, health, liability and other protection you need (and can afford)—based on your unique situation. Knowing your cash flow comes in pretty handy. For example, if you have a family that is relying on your income, the value of your human capital is pretty high. That needs to be reflected in your life insurance choices. And it should factor into whether you opt into your company’s long-term disability group plan or purchase an “own-occupation, guaranteed non-cancellable” policy that insures you in your specialty if you become disabled.

When it comes to your financial life, you probably automatically think about how your investment portfolio is performing. The markets offer returns to those who are patient, disciplined and properly structured and can punish those who guess, gamble and hold unrealistic expectations. For example, if you want to see long-term growth in your wealth, don’t rely on money market or CD rates to get you there—they are the Ring Dings of wealth-building. They look safe, but there is very little nutrition there. Instead, consider goals-based thinking that is based on your lifetime, rather than annual—or  worse—quarterly, returns. Financial fitness in your investments requires marathon thinking, not a sprinter’s mindset.

After the stretching, lifting, running and nutritional aspects of optimal health have been completed, there’s one aspect that’s often overlooked: your peace of mind. The financial equivalent is estate planning. You can have a great risk management profile, excellent grasp on your cash flow and a knockout portfolio, but if you die without a will or fail to prepare adequate Powers of Attorney and Health Care Directives, you are leaving those you love in tatters and possibly ruin. Your will, including naming executors, beneficiaries and perhaps trustees and guardians for minor children, is the road map of your wishes when you are not there to make decisions. While very few people relish the opportunity to discuss this topic, it is important! Ignoring proper estate planning is basically telling the state to make all your decisions for you. Last time I checked, there aren’t too many Governors to whom most of us would entrust our children or our financial life.

So while the warmth of the summer draws you like a magnet to work on your fitness—juicing up some kale, lacing up your running shoes—don’t forget your financial life. It’s the perfect time to establish a marathon mindset and keep building your money muscles.