Starting Good Money Habits: What Physical Fitness Taught Me About Financial Fitness
Building financial muscles is no different from trying to be healthy by following an exercise routine. Here's how you can develop good money habits (and big muscles).
If financial fitness is equated with physical fitness, Warren Buffett would be the Arnold Schwarzenegger of the financial world. Put aside the humor for a moment, and you can still cut a lean lifestyle by making a few small-but-wise decisions that will last you a lifetime.
Financial fitness has more in common with physical wellness than you may think. Physical fitness enthusiasts usually have a strict workout plan in place. They run a certain number of miles a day. They do so many push-ups or bench reps. An ability to stick to a regimen like that is also the secret to preventing poor financial health. The structure may not change much, but as you get stronger, you can add more to it – do more pushups or run an extra mile. Same thing with working out financially.
An increase in muscle mass is like an increase in savings. You save $2 each time you skip coffee, just like you lose a pound each week that you stick to your exercise program. But all good things happen in small increments.
If you have direct deposit at work, transfer a portion of it into a savings account or emergency fund. Next up, try placing a little more into savings and see how you feel until your next payday. Did you put too much in, only to later find out you can’t live without it? Or do you feel like you didn’t need that money in your wallet, anyway?
Imagine your budget is a bench press. It’s a stretch, but you should know your limits.
Overspending is like lifting too much weight – you’ll end up hurting yourself.
It’s better to know your limits and stay lean within your budget. Realize how many luxuries you really need – maybe cut back on what you don’t. Is it really important to eat out multiple times a week? Or spend time partying at clubs with overpriced drinks? Food and fun are necessities in life, but too much, and they can hurt your body – and, of course, your finances.
The longer you work (out), the more money (or muscle) you make. If you get a raise or bonus, or you move to a better-paying job, put it to work for you in the long term.
For college students faced with huge student loans, saving money can seem daunting. If you’re still in school, you may feel like the only jobs you can get are minimum wage – or worse, unpaid internships. That’s where you need a delayed gratification mentality.
Resist the tiny temptations in the here and now to receive a much greater reward in the future.
Don’t make rash decisions for the benefit of instant gratification. A savings plan can fall apart due to a costly mistake like deciding to buy an expensive sports car without thinking of extra expenses like gas and insurance. A used car may be more suitable for you right now, so put off that red corvette till sometime in the future.
I like to use the Corvette example for students who give up too early. The worst thing to do is to drop out or take a few semesters off due to financial stress. That hurts earning potential down the road, and you’ll still have to pay back the loans that you already accrued. Paying for an incomplete education is like buying the Corvette when you can’t afford the gas to run it.
Ultimately, you don’t need to be a billionaire like Warren Buffett to be successful with your money. Financial fitness means not having to worry about living paycheck-to-paycheck. Set clear and healthy financial goals that may be somewhat far off, but not so distant that you can’t see how to get there.