What Does It Mean to Be Financially Fit?

The average American had over $92,000 of consumer debt in 2021. And, unfortunately for many people, there’s no end in sight.
With debt being frequently linked to stress, anxiety, depression, and even physical health problems, it’s a serious issue that needs to be tackled. That’s why there’s a growing movement toward being financially fit.

The Definition of Being Financially Fit

While it can mean different things to different people, the simple definition is having your finances under control.
“A financially fit person is committed to paying down debts and seeks to live debt-free,” writes Genisys Credit Union. “Constant budgeting, ongoing financial education, and planning ahead enables them to make it through the month, and through unexpected expenses, without spiraling into debt.”
Here are some specific ways to become more financially fit.

Calculate Your Net Worth

For starters, it’s important to know what your assets and liabilities are. By adding up assets like cash, how much you have in the bank, and vehicles and real estate owned and subtracting your liabilities like credit card debt, student loans, vehicle loans, and mortgage, you’ll know what your net worth is.
This, in turn, should give you a bird’s-eye view of your overall financial situation. Doing this is essential for moving in the right direction. A simple way to calculate your net worth is by using this free tool from Nerd Wallet.

Maintain a Strong Credit Score

Having great credit is another critical part of being financially fit. It gives you more leverage when negotiating, can help you lock in lower interest rates, makes it easier to get approved for a mortgage, and more.
That’s why financially fit people 1) know their credit score at all times (you can get a free credit score from Credit Karma) and 2) constantly strive to improve it by paying bills on time, maintaining a good credit utilization ratio, and so on.

Have Short-Term and Long-Term Financial Goals

Those who are financially fit don’t drift aimlessly. They know exactly what they want to accomplish financially over the next few months, as well as in the future. In the short term, for example, you may be looking to pay 50 percent of your credit card. And in the long-term, you may be looking to pay off your credit card and achieve a credit score of 750 or higher.

Always Look for Ways to Save and Reduce Expenses

A big part of developing positive financial habits is adopting the right mindset toward saving and spending. Those that lack financial fitness, for instance, may get a chunk of money, but it quickly goes up in smoke. Or, they may buy a new gadget they don’t really need and take on unnecessary debt as a result.
Being financially fit, on the other hand, involves having the mindset where you continually look for ways to “trim the fat,” spend less, and save more. While this doesn’t always come naturally, it can be developed over time and can eventually lead to financial liberation.

Look to Own

Here’s the scenario. You can either A) buy a modest yet more affordable vehicle using your savings and own it outright with zero debt or B) buy a fancy yet far pricer vehicle and take on debt in the process. Someone who is financially fit would likely go with option A. It would improve their financial health and prevent them from digging a hole of debt.
This is a simple example, but looking to own, even if it means getting something a little more basic, is another key part of being financially fit.

Expect the Unexpected

Expenses are often unpredictable. And a common way many people get themselves into trouble is failing to prepare for rough stretches. Say, for example, someone has barely anything in their savings and gets hit with a major expense like a vehicle repair. This would likely result in them having to use their credit card. In turn, they would absorb more debt, which would make it harder to save, creating a negative cycle.
Or, say someone bought a new smartphone. They could stick with the basic manufacturer’s warranty, which only lasts one year, and hope they never encounter a problem afterward. Or, understanding the potential for issues after the manufacturer’s warranty has ended, they could buy an extended warranty to ensure they stay protected long-term. In this case, the phone will be repaired or replaced without having to make a brand new purchase.
These are a couple of examples of how expecting the unexpected can help create better financial health.
Upsie offers comprehensive coverage for electronics and appliances. They also help you save up to 70 percent compared to store warranties. In addition, Upsie offers Smartphone Subscription Warranties for just $9.99 per month. Learn more here.

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* This article is over 6 months old and may or may not be updated.