Christina Slavonik, CFP
Oh, yes! It’s that time of year again! It’s time to list out resolutions or goals that we would like to accomplish this year. There may be some “rollovers” from 2020! One important resolution to add to your list is to be financially fit. It’s not something that happens overnight, but with time, steady progress toward financial fitness can be maintained.
Financial Fitness Trackers
One of the key ways to know where you stand is to figure out how much you are spending on a monthly basis. Similar to calorie-counting, once you are aware of where your dollars are going, you can make a conscious effort to cut expenses and save to meet other financial goals. Just like a healthy diet can benefit other parts of your well-being, being able to adjust your financial consumption can help your savings for a child’s college or your own financial freedom. There are several methods to track expenses from creating a basic spreadsheet, or using an app such as Mint, Goodbudget, YNAB, EveryDollar or PocketGuard. Maybe one day there will be a “FinFit” device that we can wear around our pocketbooks!
Counting Calories
Counting your “spending calories” will also help to prevent lifestyle creep or the “keeping up with the Joneses” mentality. It is called lifestyle creep because even the most well-intended persons will find that a proverbial pound or two a year can add up over the course of time, and before you know it, some noticeable changes have taken place. Implement good habits to help combat this by “paying yourself first” by setting aside a designated percentage of your pay. By doing this, no matter what bonuses or pay increases come your way, you will be consistently saving.
Financially Fit Supplements
Don’t miss out on supplements that can boost your savings like getting the full employer match to your retirement account. If your employer has a 100% match up to 5%, you will need to contribute 5% of your paycheck to take full advantage of this. Consider a high deductible health plan (HDHP) with an HSA (health savings account) option. Some employers offer to deposit a portion of the annual contribution to an HSA. The max that can be contributed to an HSA for a family plan in 2021 is $7,200/year (total of employee and employer contributions). HSAs also offer a triple tax benefit and can function as an investment account for health care expenses in retirement. We recommend paying out-of-pocket expenses from cash flow to allow these accounts to grow.
Regular Physicals
Give your portfolio a physical. Over time, the asset allocation of your portfolio becomes out-of-balance against the desired target asset allocation. Get a “health scan” for your brokerage accounts and retirement plans at least once a year to see if the portfolio needs to be adjusted for risk optimization or rebalanced based on performance. Annual rebalancing of the portfolio is one way to ensure you stay financially fit.
Accountability to Become Financially Fit
Hire a personal trainer to partner up with you to meet your financial fitness goals. Financial planners create custom financial fitness programs. They also provide that additional accountability to help you achieve your goals. We all are at varying levels of financial fitness and a good financial planner has a fiduciary duty to meet you where you are and give you that motivation and focus to stay on track.
As with any New Year’s resolutions, you may have setbacks. To get back on track, ask yourself what you can do now to get to the next level. One day at a time, we can become more financially fit.