Financial Fitness: Taking Care of Your Finances Is Like Taking Care of Your Health

Taking care of your personal finances is like taking care of your health. And both are important to maintain a good quality of life.

Taking good care of your finances can have such a positive impact on your quality of life. The more you save and invest, the more control you have over your life, both in the present and future. 

The good news is you don’t need to be an expert in finance or economics to be successful. The most important factor in financial success is behavior. Your actions have the most impact on your financial wellbeing. 

A balanced portfolio is like a balanced diet

You need to eat the right mix of foods to get the nutrients you need. You can’t live on one food category alone, so a balanced diet is key to maintaining your health. 

The same goes for your money. Make sure you invest in the right mix of stocks, bonds, and cash across sectors. 

A balanced portfolio with the right asset allocation is vital to maintaining your financial health.

Budgets and diets: Nobody likes either

Living on a budget is like being on a diet. 

Too many calories can lead to weight gain and the negative health consequences that go with it. Many of us know how hard it is to lose weight once you’ve put on those extra pounds. 

When it comes to money, living below your means and sticking to a budget is necessary to financial success. If you overspend, you have limited money to allocate toward your financial goals. Even worse, overspending can get you into debt. And once you get in over your head with debt, it can be very difficult to get out.

Get-rich-quick strategies are like junk food

We all know junk food is bad. It sure tastes good and gives you immediate pleasure. But making it part of a daily diet will take a toll on your health. 

The same is true with get-rich schemes and risky speculative strategies. Plenty of opinions, seminars, and subscription services promote investment ideas and trading strategies that promise above average returns. You might get lucky and see a quick return with them. But over the long term, straying away from prudent investment principles puts your money and financial future at risk.

Financial professionals are like health professionals

Health professionals help you maintain a healthy lifestyle. A personal trainer can design the right exercise program for you. A dietitian can develop a plan to promote healthy eating habits. Without their advice you may not know what you are doing. 

The same goes for investment decision making.  

A financial professional can help you develop the best investment strategy to meet your financial goals. They can sit with you and evaluate your financial situation, understand your goals, and assess your risk tolerance. 

Most financial institutions that offer investments have someone to assist you. You can also search for an expert to work with using a variety of resources: 

  • Locate a Certified Financial Planner (CFP®) by visiting the CFP website. 
  • Find a financial advisor through the National Association of Personal Financial Advisors (NAPFA) website. 
  • FINRA’s BrokerCheck provides information on registered brokers and investment  advisors.

Annual portfolio reviews are like physical exams

The best way to know the status of your health is to visit your doctor for a physical examination on a regular basis. A thorough checkup from the doctor can tell you if you need to make any lifestyle changes. 

A review of your financial plan, at least annually, is necessary to make sure you are on track to meet your financial goals. Do you need to rebalance your portfolio? Are your mutual funds and other investments performing as expected? Have you had any major life changes? 

An annual review of your financial situation and goals will determine whether you need to make changes to your financial plan.

 Consistency equals results

The only way to see the results of a healthy diet or exercise routine is to stick to it. Taking unplanned days off from your workout routine or straying from your diet can derail your health goals. 

Consistency is key. 

The same is true when it comes to your money. Spending outside your budget and straying from your investment plan will keep you from reaching your financial goals.

Unexpected hardships are bound to happen

No matter how well you take care of yourself, you may face unexpected health issues that are out of your control. None of us is immune to chronic illnesses and some health risks. 

The same is true with money. No matter how well you manage your money, you may encounter financial hardship. 

Unexpected home and auto repairs, mounting medical bills, or suddenly losing work can strain your finances. Although you can’t  control everything, you can prepare for the unexpected. 

One way to prepare is by creating an emergency fund. This is a separate savings account with enough money to cover three to six months of living expenses. 

Only use this money in case of an emergency. Never invest it, as it must remain in a risk free account that is easily accessible when you need it. 

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