Estimated reading time: 10 minutes
Getting fit with your body has little to do with being financially fit; however, peace of mind and reduced stress go hand-in-hand.
Don’t Undervalue The Power Of Earning, Saving, and Spending Money To Build Wealth
Just because you have a job doesn’t necessarily mean you will become financially fit and out of the woods forever.
An example of this might be justifying a purchase on a credit card because you will get paid the following week.
Perhaps you don’t have the money this week but will be getting a side job that will cover the expense the next.
Whatever excuse you come up with to motivate yourself to buy something you can’t afford, you’re pushing yourself into a corner.
Most people would say the simplest way to make money is to get a job, and they are right.
What becomes apparent for many savers is the earning potential of the money they stash away or invest.
I’d also argue that people who don’t have more than one income stream are doing an injustice to their bank accounts.
Assuming that money is a constant or a revolving door can get you into big trouble.
This is why it’s so important to always have a plan b in case of employment turmoil, illness, or other circumstances that would put you in the wrong financial spot.
What does it mean to be financially fit?
To me, being financially fit means you cover all of your bases so the walls don’t crumble down, and that’s no easy feat.
How Do I Know If I Am Financially Fit With My Money?
I’ve been following your blog for a few years now and finally have the nerve to write you an email.
Although I’ve followed your budgeting concepts and saved money, I’m still unsure if I am on the right path.
I’ve been toggling with talking to my financial advisor about how much money I would need when I retire, and I think I’m at a spot now to do so.
I’m in my early 30s, have a $20,000 emergency savings account, am single with no debt.
In about two years I will own my home as I’ve been adding lump-sum payments to my mortgage,
I try not to think about becoming wealthy. Instead, I create the illusion of living a simple life.
This makes it far easier to concentrate on earning potential than setting high expectations guided by stress.
How do I know that I am good with my money and making the right decisions today for my future self?
Thanks for any feedback.
No End In Earning Potential
Thanks for your question Andy and taking the step forward, looking for advice.
Congratulations on almost paying off your mortgage and putting down those lump-sum deposits.
As long as you take all the proper steps to cover your bases, you’ll be fine, including a plan B.
I don’t know how much money you’d like to have for retirement. However, that’s certainly something to talk about with your financial advisor.
Based on your current Debt to income ratio, savings, and investments, your advisor should be able to come up with a future scenario for you.
We had one done earlier this year, and it ended up being a 10-page evaluation booklet and presentation detailing our investments and retirement needs.
Take the time to measure your money habits based on the signs of being financially fit below.
While reading them, ask yourself if you can do more, should do more, or are happy with the road you are taking.
It’s easier to gain perspective by reading about what others do, so I must reiterate what we have done.
If you have any further questions feel free to message me.
Time Value Of Money
Have you ever heard the expression, “Time is Money”?
I use that concept for many aspects of my life, especially our mindset toward investing for our future.
One of the most important concepts of being financially fit with your money is understanding the time value of money.
What is the time value of money?
This means that the money you invest today will be worth more.
- FV = Future value of money
- PV = Present value of money
- i = interest rate
- n = number of compounding periods per year
- t = number of years
Based on these variables, the formula for TVM is:
FV = PV x [ 1 + (i / n) ] (n x t)
For example, If I gave you $100 today and you put that in a bank account that earns 5% interest yearly at the end of the year, you would have $105.
In other words, saving or investing your money over time will increase the value you started with.
How does this concept apply to becoming financially fit?
Well, if you save your money today in the future when you might need it, then it will be worth more than you started with.
Even with the cost of living increases, your money is still better off invested in something over time than it is being spent at the present price.
6 Signs You Are Financially Fit With Your Money
Giving your bank account and investments a workout takes just as much dedication as going to the gym.
It’s not always something people want to do, but we should all do it for improved well-being.
Below are what I feel are financially fit perspectives on relieving financial stress and building walls to protect your kingdom.
The only downside with investments is that anything can happen at any time, so backup plan b is a critical avenue to investigate.
1. You Have A Backup Plan
Side-hustle jobs such as working for cash using skills you have gained over the years, such as painting, computer expert, blog manager, blogging, online freelance jobs, tutoring, companion care, flipping houses, etc.
The list of side jobs is endless, so take it for what it’s worth and invest your time to earn money.
Instead of sitting in front of the television every night for 3 hours after work, balance your tv time with family and earn backup cash.
For example, many bloggers who have monetized their sites earn a monthly salary every month whether they blog or not.
You can reach a point where your blog works for you, and passive income comes rolling in.
Of course, the more you work, the bigger your paycheque will be, but that’s extra cash on the side for some bloggers and others a full-time lucrative income.
In the event increasing your money supply is not in the cards minimizing expenses and knowing how low you can go before your financial breaking point is crucial.
Again, an emergency savings plan is a form of a backup plan b, so keep stashing cash even if it is a few dollars a month.
2. You Budget And Know Your Expenses
Anyone who wants to ensure they are on track and financially fit must use a monthly budget to some degree.
I don’t care what anyone says about budgeting because if you don’t know precisely what you are spending and how much you save, you are missing a piece of the puzzle.
A budget doesn’t have to be complicated, whether using budget jars, an Excel budget, or a pen-and-paper monthly budget.
You’re one step ahead of the rest with a monthly budget.
3. Saving Money Is Simplified
You’re financially fit when saving money becomes a part of your monthly budget and does not become compromised by overspending in other categories.
Saving money should be a straightforward process automatically directed to savings or investments every month.
There was a point when my wife lost her job, and we had to stop investing, which put us in a financial crisis as we were living from one paycheque.
That meant less money to invest, save and use towards the renovations we had planned when we bought our house.
It also put a ding in adding lump sum payments to our mortgage even though we still managed to pay it off in 5 years.
4. You’ve Conquered Debt
If you’re living a debt-free life and still earning an income or side hustle and have covered all your financial bases, you’re financially fit.
Knowing that you have no debt, can save money, and invest your retirement to the max is a surefire sign that you’re doing good.
5. You Invest Your Money
Whether you invest your money in real estate or retirement savings accounts such as a TFSA, RRSP, or other stocks and are debt-free, you’re doing fine.
There was a time when we paid off the mortgage, bought our vehicle with cash, and had no debt but weren’t contributing the max to our investment portfolio.
It wasn’t until this year that we caught up with everything and were able to relax as we feel we are financially fit and are doing everything possible for our retirement.
Of course, we could invest our money in other ways, but we are now happy with our financial spot.
6. Cash Flow Is Steady
You know you are financially fit when you are earning a steady paycheque, whether from your employer or other income, and it surpasses your needs.
I do caution with this sign of being financially fit as it could be taken away from you at any point, which is why saving is critical.
My employment view is that having a job is better than not having one.
Taking advantage of small or large savings opportunities is part of the stepping stones to becoming financially fit.
7. Bills Are Always Paid On Time
This is a big one for us, and not because we have money saved now; it has always been a priority to pay all our bills in full each month.
I understand that some people use their credit cards for expenses because something has come up they were not prepared financially for.
You must pay that debt off quickly and avoid paying the minimum payment.
So, if your bills are paid on time, and you have no debt or Debt you pay in full each month, you’re financially fit.
8. Spending Money Is Not Stressful
Now that we are debt-free, we’ve found that stress about spending money has relaxed a bit.
We no longer panic about buying something we may not have budgeted for because we already know whether we can afford it.
That’s the perk of having no debt, investments, and money in the bank; however, there is always that error in caution to watch for.
I’ve learned that just because you have money doesn’t mean you should be spending it, as it will always be there.
You will find your mind is at ease when shopping, even bargain hunting.
It’s certainly a place I recommend everyone to strive for because it’s the best feeling knowing you’re financially fit.
Tying Wealth To Motivation
Becoming financially fit is anyone who takes their money seriously.
They work hard to stay out of Debt, invests in their present and future self, and all things in between with goals in mind.
What worked for us is we created motivational quotes and put them on the refrigerator.
They were supposed to remind us why we were on this financial journey and the importance of balancing a relationship with money.
Now that we are a little family, it’s far more critical, but with experience, we’ve come to understand motivation is our wealth.
The more we encourage each other and work together, the further ahead we get.
I believe this same motivational mindset applies to any situation, even those embarking on this journey for the first time.
Discussion: What motivates you to become financially fit? Leave me a comment below, and I’ll be sure to respond.
If you have a question you’d like to ask Mr.CBB, please use the contact form on the blog to send it in.