How is your financial cardio?
Good cardio heath means you can take the stairs or chase after the kids without losing your breath. It also means you are pumping blood efficiently throughout your body, nourishing all your organs. Good financial cardio is really no different; it means you end the month on a positive basis, having paid all your bills, added to your savings and still had enough left over to enjoy life. No extra stress or strain.
Making sure you are in good financial cardio health means understanding your expenses so that you have a positive monthly cash flow. Simply put, once all is said and done you have money left over – that is positive monthly cash flow.
But do you really know your cash flow? Now is the time to take our Financial Cardio Test. By taking the test you will be able to see exactly where you stand. Once completed you will be able to identify your strengths and weaknesses, and from there be able to start putting a plan in place to improve your financial cardio health.
For most of us the best way to get a handle on cash flow is by developing a budget. If you have one you are ahead of the game, but if your results are not what you want them to be perhaps it is time for a review. Do you have money leftover at the end of the month once you do your budget? If so, that needs to go into savings. If there is more month than money, it is not only time to look at expenses but to cut them. The best way to do this is to track your expenses over a few months.
A great tool to use is the Go Figure Family Budget Calculator on our website. Take your first month and list all your expenditures from your chequing and credit card statements, bills and receipts in the corresponding budget category. Then repeat the process for each month.
Compare what you have spent over the last few months with what you budgeted. Go to your highest non-essential category (i.e. entertainment, clothing) – is there a way to decrease that amount? By changing your spending habits just a little your overall financial health will improve.
Once you have the process in place, review all expenses to figure out ways to reduce spending, decrease debt and increase savings. Keeping to a budget is a sure way to get or stay financially fit – it is not meant to take the fun and pleasure out of life. It is meant to ensure you have set aside enough to enjoy yourself.
The best way to improve your financial cardio is by decreasing your debt and improving your cash flow. Start by making more than the minimum payment each month. Even a little more will help slowly bring down the balance. Make sure you are paying more on the cards that have the highest interest rate so you pay less interest overall. Call your credit card companies and ask for a lower rate. Changing how you use your card is the hard part, try to pay off new purchases as they show up on your statement, in addition to your budgeted monthly payment.
You can also borrow in the form of a consolidation loan that combines all your balances into one loan and one payment. Typically, it has a lower interest rate, a fixed term and the payment is less. The hitch is that in order to stay ahead you cannot start carrying credit card balances again. By improving your cash flow you can be in a position where you do not need to rely on your cards to make ends meet, pay for an unbudgeted expense or go out for dinner.
After six months, redo the Financial Cardio and Flexibility tests to see your improvement. You will be surprised how little changes can make big differences. Once you feel you have a handle on your budget and payments you can start looking at the rest of your financial fitness. As your financial advocate we are here every step of the way. We C.U.™ so you can get financially fit!