Here's a list of five steps to financial fitness from the book The Net Worth Workout: A Powerful Program for a Lifetime of Financial Fitness courtesy of the author (I liked the book -- see my review of it):
1. Assess your current shape. When starting a new physical fitness program, it’s advisable to have your doctor do a checkup—weight, blood pressure, heart rate, and more—to assess your current fitness level. The same principle applies to starting a new financial fitness program. Before consulting a financial advisor, get your financial papers in order. Then, make a detailed list of all your assets and liabilities—the first step in assessing your current net worth and the work required to increase it.
2. Set specific goals. Runners routinely determine how much stamina and speed they need to gain for a particular race. In the same way, identifying financial goals is crucial before going ahead with a financial fitness program. Make goals specific and meaningful, reflections of your personal values. Make sure they’re actual goals, not just dreams. Classify them as either short-term (paying off credit card debt), medium-term (planning a wedding), or long-term (funding your retirement). Then, come up with a detailed, realistic plan to achieve them.
3. Use the right equipment. Just as the right shoes can give an athlete a winning edge, the right financial products can maximize and channel your assets. Explore and compare all your options—from CDs and mutual funds to 401(k)s and other tax-advantaged accounts. Get the information you need to confidently choose the best possible vehicle to achieve your financial goals.
4. Practice regularly. Commit to a weekly two-hour millionaire’s workout. Schedule it on your PDA. Use the time to organize your bank statements, check the performance of your retirement account, look into programs to accelerate your mortgage payments, and learn what a Roth IRA is. You’ll soon look forward to your weekly financial education and empowerment session.
5. Learn to accept setbacks. Just as athletes occasionally suffer injuries, investors occasionally lose money in the market. Accept setbacks as part of the journey and develop a plan for handling them. Learn to balance your portfolio. Reserve enough cash to avoid pain. That way, when setbacks occur, you’ll be prepared to deal with them before they threaten to cause devastation.
Comments