Understanding Your Financial Anatomy

Another year has come and gone, and with 2024 just getting underway, it is time to not just talk about getting into financial shape, it is time to do it!?

Physical health requires a combination of “checkups” with a general practitioner and sometimes visits to specialists for specific medical purposes. However, the most essential part of a long-term, physically healthy life is what you do between doctor appointments. How well are you eating, exercising, and caring for yourself??

Financial health operates the same way. It is essential to have regular “checkups,” sometimes a visit to a specialist is needed for a specific situation, but what matters most is your behavior, discipline, and motivation. When it comes to successful financial planning, most of the outcome is driven by behavior and action plans, so why do we spend so much time looking for shortcuts, get-rich-quick schemes, and guaranteed passive income streams? Life is never as easy as a 90-second TikTokers jetsetting worldwide makes it seem, but they are so popular because we humans always love a good shortcut. Shortcuts are great, but taken too far can have disastrous outcomes.?

Financial wellness, like physical wellness, is mostly rooted in healthy, consistent, and long-term behaviors that compound their benefits over time. If you were hoping this article would offer you a quick path to riches, now would be a good time to go back to scrolling YouTube shorts and hoping your NFT will make that big comeback. However, keep reading if you are looking for foundational advice on what you can do today to set yourself up for financial success tomorrow.?

Understanding Your Financial Anatomy

Financial Checkup: As you would assess your physical health before starting a fitness regimen, understanding your financial situation is crucial. This involves calculating your net worth. Calculate the total value of what you own (assets) and subtract the total amount you currently owe (liabilities). This is your starting point and a great reference point for next year’s checkup to help assess progress.?

SMART Financial Goals: Like setting a goal to run a marathon or lose a specific amount of weight, your financial goals should be Specific, Measurable, Achievable, Relevant, and Time-bound. Whether saving for retirement, buying a house, or paying off debt, your goals should be clear and actionable. Remember, saying you want to be rich is like saying you want to be fit; without a detailed plan, it’s just a dream.

Financial Diet Plan

Income and Spending: Your income is your nutrition, and your spending is your calorie intake. To be financially fit, you must consume less (spend) than you intake (earn). Creating a budget is like planning your meals; it helps you make healthy choices about where your money goes.

Emergency Fund: This financial pantry is stocked with healthy essentials you can rely on during tough times. Just as you might have canned goods and non-perishables for a storm, your emergency fund protects you during financial downturns.

Regular Financial Exercises

Saving: Like a daily jog or gym routine, regular saving is the exercise that builds your financial strength over time. It’s not always exciting, but the consistent effort pays off. Automate your savings to make this as painless as possible—think of it as having a workout buddy who nudges you out of bed for a morning run.

Investing: If saving is your cardio, then investing is your weight training. It helps you build and grow wealth over time. Diversify your investments to spread the risk; it’s like cross-training to improve fitness.

Debt Management: Managing and reducing debt is like shedding unhealthy weight. High-interest debt, especially from credit cards, is like junk food—it might feel good at the time, but it’s harmful in the long run. Focus on paying off high-interest debts first, then work your way down. It’s not the most enjoyable part of financial fitness, but it’s essential.

Avoiding Financial Injuries

Impulse Spending: Just as overeating or overtraining can lead to injuries, impulse spending can hurt your financial health. Avoid it as you would avoid junk food. If a big purchase tempts you, sleep on it. Often, you’ll find you didn’t need it as much as you thought.

Not Overdoing It: In fitness and finance, overdoing it can lead to burnout or injury. Don’t be so frugal that you’re miserable, and don’t invest so aggressively that you’re stressed. Find a balance that allows for enjoyment while still moving towards your goals.

Regular Check-ins and Adjustments

Track Your Progress: Just as you might track your fitness progress with regular weigh-ins or time trials, check your financial progress regularly. Are you moving towards your goals? Do you need to adjust your budget or savings plan?

Stay Flexible: Life changes, and so will your finances. Be prepared to adapt your financial plan as necessary. A sudden expense or change in income shouldn’t derail your entire financial fitness plan.

The Role of Discipline and Consistency

Discipline and consistency are as crucial to financial fitness as physical fitness. It’s not the big gestures but the daily habits that make the most significant difference. Stick to your budget, save regularly, and keep your goals in sight.

Conclusion: Embrace the Journey

Just like physical fitness, financial fitness is a journey. There will be ups and downs, but the key is to stay consistent and motivated. Celebrate your victories, learn from your setbacks, and keep moving forward.

Remember in the gym of life, financial fitness is just as necessary as physical fitness. Keep lifting those savings and trimming that debt, and you’ll be in great shape! And hey, if you ever feel like giving up, just think of compound interest as your trainer – it works you hard now so you can relax later!”

?

The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.

This content not reviewed by FINRA

Northbrook Financial is an Investment Adviser registered with the State of Maryland. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. Please contact us at 410-941-9709 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate or modify any restrictions on the management of the account. Our current disclosure brochure, Form ADV Part 2, is available upon request, and on our website https://www.northbrookfinancial.com