The summer is almost here. It is likely you have looked at yourself in the mirror. You have probably said to yourself I have to get this body into shape and ready for the beach. Who doesn’t want to look good while they are walking on the beach or relaxing poolside.
So in order to get your body beach ready you have to put in some work to lose a few pound or firm up your body.
The same is true regarding your personal finances. When the summer is here we will only have six months remaining in the year. While you are getting your body in beach shape why not work on getting your finances into shape as well. To get your finances beach ready is similar to getting your body into beach shape.
Here are 6 easy steps to take now to firm up your finances so your body and finances are ready for the beach.
Identify what you want to improve
Just like you would look in the mirror to determine what area of your body you want to improve. Do the exact same thing with your finances. Take a look at your finances and determine what area of your financial life you want to improve upon or look better. Are you overweight because you are carrying to much debt or maybe you are a little skinny and need to build up your savings. Which ever area needs improving the first to is to identify that area first.
Take your current measurements
Once you determine the area or areas you would like to improve you need to see where you currently stand. For example, you want to lose 10 pounds how will you know you lost 10 pounds without measuring your current weight by standing on a scale. These few measurements can help you determine where you stand currently.
Your financial net worth is simply your financial assets minus your financial liabilities. Knowing your net worth is an excellent way to measure your financial health. Calculating your net worth will help you track your financial progress from year to year or from month to month. When you calculate your net worth you want this number to be positive not negative.
Debt to Income
Debt to income measures the amount of income you earn versus the amount of debt you have outstanding. It’s another good indicator of your financial health.
You calculate it by totaling up all of your monthly debts then dividing it by your income. Using your net income is a more accurate calculation because it is the actual amount you take home which is available to service your debt.
Your credit score determines your credit worthiness which is based on your history of managing to payment of your bills in a timely manner.
Credit score can range from low 400s to mid 800s. Maintaining a good to high credit score has its financial benefits because you will usually receive better interest rate as well as financing terms when you are financing a purchase.
Having a healthy savings has significant benefits and is another indication of your financial health. Calculating your saving percentage is simply dividing your gross income by your savings amount. When calculating your total saving take into consideration the amount you saving for retirement, emergency fund and any other general savings.
By improving these numbers you will improve your finances.
What numbers do you want to achieve?
You have calculated your numbers to access where you currently stand. Were the numbers better or worse than expected? Improving just one of these numbers will help your finances. Just like you want to lose 5 or 10 pounds, you want to improve your numbers so you can look financially better. So set a goal to either increase your savings percentage, reduce your debt to income, increase your net worth or improve your credit score.
Get Financially Lean
One way to get your body to look great is to get lean. You can apply this same concept to your personal finances. By making your finances lean you will improve your financial situation. Here are several ways you can make your finances lean:
Reduce the amount of debt you have outstanding
Reduce the number of credit cards you have open or carry in your wallet
Reduce the number investment accounts
Reduce the number of bank account you have open. Try to use one bank if possible
Eliminate paper statements
All of these will help you improve your finances.
Reduce Calorie Intake
If you are looking to tone up or lose some weight you usually will reduce the amount of food you are eating as well as monitor what you are eating. You can apply the same to your finances. Consider reducing the amount of money you are spending as well as keep track of where you are spending money. This will enable you to save more and see where you are spending your money to determine what can be eliminated.
Make Small Lifestyle Changes
Now you have make some changes to your finances don’t let all of your hard work go to waste. Why not make a few lifestyle changes to help you maintain this financial beach body all year long. So you ask what do I need change? Start with your financial habits. Identity your good financial habits and look to eliminate your bad financial habits. These small habits can have an impact on your financial life year round.
So now use these 6 simple steps to take action to get your finances in beach shape. Start now so you are not looking back wondering where did my summer go.
Do it now.
It will not only help your finances to look good but will help you simplify your finances as well.
Til next time, take one step at a time to simplify.