5 Keys to Getting Financially Fit

Are you ready to get serious about improving your financial life?

If so, it’s important to lay the groundwork for economic success now, while you’re younger.

After all: It’s way easier, less complicated and far less time-consuming to learn how to take small, but smart money management steps in the present -- rather than having to fix major money blunders or play financial catch-up in your later years.

Here are five keys to getting financially fit now.

1.   Manage credit and debt wisely

Credit and debt issues are big challenges for many Millennials. So chances are you’re facing these issues too.

Unfortunately, those in their 20s an early 30s have the worst credit scores among all adults in America – lower than the scores of Gen Xers, Baby Boomers and members of the Silent Generation. In fact, according to a 2016 TransUnion study, 43% of Millennials have a “sub-prime” credit score, or a credit score below 600.

That’s a score that will make banks, credit unions and others reluctant to approve you for a loan when you need it. Bad credit also makes it tougher to rent an apartment, get a job, or sometimes get the best auto insurance rates.

Your FICO credit score ranges from 300 to 850 points and is a direct reflection of how well (or how poorly) you’ve handled your debts.

If you’ve gone to college, you’re probably already juggling student loans or will soon have to repay them. Seven out of 10 college students these days borrow money to finance their education, federal data show. And with $1.3 trillion in student loans outstanding, the average recent college grad has student loans that top $37,000.

Other borrowing is also on the rise.

Even though two-thirds of Millennials don’t own a credit card, many members of Generation Y are getting caught up in another, far worse, form of debt: payday loans.

Don’t fall into this financial trap. If you need cash quickly, there are far smarter ways to get money – ranging from selling items you don’t need to taking a payroll advance from your employer.

At a broader level, make sure you manage credit and debt wisely.

Pay all your bills on time, every single month. Reduce any credit card debt you may be carrying, and only charge what you can afford to pay off in full each month.

Good credit will benefits you in lots of ways – from helping you land a job with prospective employers who check your credit (and a lot of them do!) to enabling you get the best rates and terms on everything from mortgages and car loans to insurance and utility deposits.

2.   Understand the four ways to use money

Too often, most of us only do one thing with our money: we spend it. But if you want to become financially fit, you’ve got move beyond the cycle of getting a paycheck and spending pretty much every dollar you earn.

We all have choices for what we do with our money. You might want to travel more often, start a business, or even try your hand in the stock market.

Regardless of your specific interests or goals, there are really only four basic ways to use money: You can save it, spend it, invest it, or donate it.

Once you become aware of how you’re actually allocating your hard-earned dollars, it’s empowering to put your cash to work in a variety of ways.

Make a point to think more consciously about what percentage of your money is being spent (whether or bills or discretionary purchases) versus what percentage of your money is going towards savings, investments or charity.

As a rule of thumb, try to save at least 10% of your income. Investing through an employer sponsored retirement plan, such as a 401(k) or 403(b) plan is a great way to turbo charge your savings – since your employer may offer you a company match. And donating to the cause or charity of your choice isn’t just a nice, socially responsible thing to do – it can also give you tax breaks too.

3.   Always have a Plan B

I’m a big believer in being prepared – not just for the things we know are coming down the road (like the wedding you might be planning or the baby you might intend to have), but also being prepared for the unexpected.

So how do you prepare yourself for life’s setbacks or situations that can throw your finances out of whack? No need to become a modern day Houdini or start wasting money on psychic hotlines to predict your future.

Instead, start to equip yourself to deal with a set of circumstances that I call “The Dreaded D’s:

·     downsizing

·     divorce

·     death in the family

·     disability

·     disease

·     disaster (natural or man-made)

If any of these circumstances happen to you, expect a major shakeup in your finances. But there are two ways that you can blunt their impact.

First, shore up your savings. Having a cash cushion almost always helps you to better weather a financial storm. Even if you can only set aside an extra $25 a month, do it. You’ll be happy you have some extra money on reserves in the event of a financial or personal emergency.

Additionally, protect yourself by getting adequate insurance. That includes life insurance, disability coverage (which protects your income stream), and other forms of coverage like auto insurance, homeowners or rental insurance too.

It’s easier to bounce back from a financial setback when you’ve taken precautions and developed a Plan B to guard against a host of “what if” scenarios.

4.   Adopt the right money mindset

If there’s one area that trips up far too many people, and prevents them from becoming financially fit, it’s that they have the wrong idea about what it means to be “successful.”

Too often, people think that financial success is something external – particularly something that can be shown, worn or bought.

That’s why a lot of your friends (and maybe you too!) spend a lot of time Instagram, Facebook or other social media sites checking out what everyone else is doing, what restaurants they’ve recently eaten at, or what their latest travel destination has been.

Trust me: comparing yourself to others – especially to a hyped-up, filtered, glamorized social media depiction of someone else’s life – is a quick way to financial ruin. It’ll just send your spending out of control by giving you a bad case of “Keeping up with the Joneses” … or perhaps Keeping up with the Kardashians!

Either way, resist the urge to follow the herd and do what every one else is doing – especially because most of those people are broke (even if they don’t appear to be), and your goal is to become financially free.

5.   Embrace being accountable

Finally, in your quest for financial fitness, don’t discount the importance of being accountable to others.

Many of us don’t like to have to “answer” to someone else. Maybe you feel like those days are over – once you reached a certain age or perhaps moved out of your parents’ house.

Sometimes people feel it’s tacky, gauche or inappropriate to openly talk about money matters. In other instances, we might feel ashamed about disclosing financial problems or issues to those in our circle.

But suffering in silence won’t help you meet your goals. It’s better to have a trusted confidante or two – a person to whom you can share you financial objectives and then check in with that person now and again to talk about your progress.

That individual could be a family member or close friend. Even better, in my opinion, is a competent financial adviser who can offer professional guidance and specific fiscal advice for your situation.

An accountability partner is crucial and could just be the extra boost you need as you progress on your financial journey.

Use the five key strategies above and you’ll become financially fit sooner than you think!

Lynnette Khalfani-Cox,The Money Coach?, is a personal finance expert, television and radio personality, and the author of numerous books, including the New York Times bestseller Zero Debt: The Ultimate Guide to Financial Freedom. Lynnette once had $100,000 in credit card debt, before paying it all off in three years and turning her financial life around.

Copyright ? 2016 Lynnette Khalfani-Cox