How To Improve Your Financial Fitness

• Author: Mary Singleton
• Posted: 2024-02-11

Unforeseen occurrences can befall anyone, and unexpected bills can throw a family for a loop. Unexpected bills can include a major car repair, a medical bill, or a financial disaster. A 2015 Pew study found that 50% of Americans were not prepared for an unexpected financial hardship. A separate Pew study found that only 45% of Americans had enough funds to replace one month of their income. There is no reason for you to lose sleep over an unexpected financial hardship. By taking a few simple steps, you can prepare yourself for unexpected financial surprises.

Get A Grip On Your Finances

Unless you have an idea of your earnings and your expenses, there is no way that you can get financially fit. The first thing that you have to do is determine how much money you are making on a monthly basis. These are funds that include your paycheck and any other odd jobs that you may do in order to make money. Next, you need to go over your monthly spending. This should include all loans, payments, entertainment and hobbies. If your expenses are higher than your earnings, then you need to find a way to spend less or earn more.

Get Your Money Right

Now that you have painted a full financial picture for yourself, it is a good idea to evaluate your total finances. If you have any type of debt, then try to pay down those balances. If you have high interest on things such as your mortgage or your car loan, then you can try to refinance in order to get a better deal. When it comes to a retirement fund, make sure that you are contributing the full amount possible to that fund.

Do Not Forget About Insurance

Insurance is something that is of extreme importance. You want to make sure that you and your family have adequate coverage in case of an emergency. When it comes to insurance for the home, make sure that you have enough coverage to help out in a natural disaster. Life insurance and disability insurance are also wise to investigate. If the worst were to happen, you want to make sure that you and your family are covered.

Get The Minimum Amount Saved

Now that you have a clear idea of your finances, it is wise to calculate the minimum amount of money that you would need to cover your expenses each and every month. Bills always have to get paid, so they should be taken into account first. After that, look at your necessary monthly expenses. These include car payments, groceries, home payments, and utilities. Finally, make a list of the monthly spending that you can do without. This can include things like cable television, fast food, and your gym membership. After adding all these items up, you will know how much money you will need to have each month.

It is wise to try to find ways to reduce spending on the things that are reducible. Think about making lunch everyday instead of eating out. Think about getting a better deal on cable or getting rid of cable altogether. The money that is left over after reducing the budget is the amount of money that you will need for your emergency cash fund. If there is an unexpected event, this emergency cash fund can be used.

Cover Your Family In A Disaster

In order to prepare for a financial disaster, a disaster fund is absolutely necessary. This is a fund that you can keep in a savings account for easy access. This is the money that you should have to cover all of the bills that must be paid monthly. A disaster fund is there to cover three months of expenses. This pays for the expenses that are absolutely essential.

Just Get Started

It does not matter if you have started to improve your finances in the past, or if you are starting from nothing. Having the full picture of your expenses gives you the information that you need to meet your goals. If you add to your emergency fund each month, you will have a place to land if emergency happens. Once you are able to get to the three month threshold, it is wise to keep contributing. A financial disaster is completely unforeseen, so the more money that you have stored away, the less stress you will have in a financial disaster.