3 Smart Ways to Financial Fitness

Do you want in on what people have on their resolutions lists this year? Getting into shape, losing weight, and enjoying life are the top three resolutions according to a survey done by Nielsen, the global leader in information, statistics and insights.

Fitness is indeed “the” new mantra. There are Apps to track our steps and pulse rate, yoga teachers to instruct us via Skype, and sleep calculators to tweak our wake up time for optimized sleep. It is a long way from the days when you could smoke in airplanes and serve double fried dishes to guests. We are conscious of what we do with our body and what we put into our systems. Whether it be juice detoxes and jejune diets or brisk walks and blistering workouts, we are more than ready to go the extra mile to get and stay physically fit.

Interestingly, financial fitness comes in immediately after physical fitness at #4 on Nielsen’s findings. With nearly 30% of people surveyed committing to saving more and spending less, financial fitness is something that you don’t want to ignore. Here are three smart yet basic things that you can do to improve your financial health.

Get Set

“Not documented, not done” is so true of money management. How many times have you wondered “where” your last paycheck went? Your budget is more than just an income/expense tracker. With the help of personal finance services like Mint, YNAB or MoneyView, your budget works like a power tool. Whether automated or on paper, you can set your budget up and use it to understand, control and improve your financial behavior. It lets you visualize and separate mandatory expenses (rent, food, transport, etc.) from the discretionary (add-ons on your cable plan, fine dining, keeping up with the Kapoors, etc.), measure month on month improvements, set targets (e.g., save 15% of your income) and demarcate danger zones (debt repayments inching past 40% of your monthly earnings). Nerdy as it may sound, a budget (automated, online or just pen-and-paper) is really the starting block of a financial fitness regimen.

Cut Flab

The most visible flab is the discretionary spend items that you can do without. But that is just the tip of the iceberg. Hidden flab often lies in the details, in the interest rates on your loans or credit, the fees charged by your bank, your insurance or your mutual fund manager, the clauses that increase your interest rate without your noticing, and the like. Hidden flab also lies in our minds, when we convince ourselves that a particular expense is mandatory when it really isn’t. This gets tricky when it comes to professional expenses, a little like Diwali treats, but then flab by any other name is just as flabby.

Repay Debt

Debt or a credit record, in today’s world, is an important indicator of financial health. In certain economies, it is an essential one. It is also the personal finance equivalent of a dadbod. First sign of being unfit that shows up and the last to go away. It takes just a couple of months of indiscretion for it to become a liability. Figure out right now how much debt you carry. Include education loans, home loans, car loans, credit card dues, and any loans you might have taken from family and friends. Next, calculate how much of your income should go towards repayments, and how long it will take to get debt free. Financial experts recommend keeping your monthly debt repayments below 30-35% of your income. However, this assumes that you are making the maximum possible payments on all your debt. If not, it could take you forever and a year to get there. You might want to look up the snowball and snowflake approaches to debt repayment to learn more.

We are very attentive to physical, emotional, and even spiritual lack of ease. If we can be just as sensitive and responsive to our level of financial fitness, we will get to the point where our money works for us instead of the other way around. And sooner than we can imagine. Trust us, it is not a bad place to be in. Share your financial fitness stories with us in the comments.

Subhorup Dasgupta is a Hyderabad-based blogger and artist. He writes about responsible living at his blog,  Subho’s Jejune Diet.