Tuesday, November 30, 2021

How to Make Good Decisions

James Clear is a best-selling author, speaker, and entrepreneur who focuses his work on habits, decision making, and personal growth. He has a bachelor's in Biomechanics from Denison University ad an MBA from Ohio State University. An article written by him provides interesting insight into human willpower and how to avoid making bad decisions.

James shares that “your willpower is like a muscle” and “can get fatigued when you use it over and over again.”  During a regular day, people make hundreds of decisions, and every decision we make is like doing one more squat on leg day. Throughout the day, our willpower becomes tired just as our legs would. This is often referred to as decision fatigue.

In a sense, there is a limited number of decisions that your brain can make each day before it becomes tired. This phenomenon explains why people are more likely to make impulse decisions at night. As your energy fades, you have less ability to make good decisions, so we make easy decisions instead.

In relation to our finances, this includes our ability to stick to our budget and avoid impulse purchases or decisions. If you go grocery shopping at night, you are more likely to buy things you don’t need. If you spend time on social media at night, you are likely to waste more time than you meant to on these apps. One way to help with these decisions is to decide in advance what you will do. For grocery shopping, this means sticking to a list, and for social media, it could mean setting a personal time limit. Here's a little side tip about that too - If you struggle with social media binging, many phones now offer a setting to help you limit your screen time. You set your own daily limit and your phone will remind you when this limit is reached.

If you notice yourself experiencing a lack of willpower or decision fatigue there are ways to overcome it. James suggests 5 habits (listed below) and goes into detail with each.

  1. Plan daily decisions the night before
  2. Do the most important thing first
  3. Stop making decisions. Start making commitments
  4. If you have to make good decisions later in the day, then eat something first.
  5. Simplify.

For more information on decision fatigue and how to make good decisions, refer to the full article here. Feel free to reach out if you have any questions or want help getting started on your goals.

Here to help,

Your Financially Fit Team

Sunday, November 21, 2021

Setting S.M.A.R.T. Financial Goals

Many people struggle to achieve goals because they aren’t well defined. It isn’t enough to say “I want to do more yoga” or “I want to save more money”. These ideas aren’t fully formed and don’t have a plan attached to them. What turns that dream into a goal is making it actionable. If you don’t have a plan for how to achieve your desired outcome, it isn’t really a goal at all, but a wish.

Setting SMART goals helps remove ambiguity and makes achieving the goal easier in the long run. Let’s walk through what smart goals are and an example so you can set your own. 

The examples provided will be 1) losing weight and 2) saving money.

S - Specific

When beginning your goal, try to answer the 5 Ws: 

  • What am I trying to accomplish?
    What resources (time, money, people, etc) are needed?
  • Why is it important?
  • Who else is involved? Are others doing it with me?
  • When can I regularly work on this goal?
  • Where will I work on this goal? (or where is it located?)

EXAMPLE 1: I am trying to lose weight so that my health will improve (what and why). My spouse wants to lose weight with me (who). We will do this by exercising at the gym (where) every Tuesday and Thursday evening at 5:30 when we get off of work (when).

EXAMPLE 2: I am trying to save money (what) so my wife and I (who) can afford a downpayment on a house (why). We can make a weekly budget at home every Sunday morning when we wake up (when and where).

M - Measurable 

  • How will I know my goal has been accomplished?

EXAMPLE 1: I want to lose 30 pounds - instead of "more weight" because it's easy to measure this.

EXAMPLE 2: We need to save $40,000 for a 20% downpayment on houses that have the space to meet our needs.

In both of these examples, having a specific number and a clear understanding of what is required makes the goal more focused. This way, it is clear what you're working toward and when you are done.

A - Achievable

  • Is this a realistic goal?
  • How can I achieve it?

EXAMPLE 1: I can lose 30 pounds because I would be within a healthy weight range for my height if I do so. By focusing on losing 3-4 pounds a month, my goal is more realistic and can be a sustainable change.

EXAMPLE 2: It feels far-fetched right now, but is achievable as long as we are consistent. Realistically we can save $500 a month right now, meaning it would take 80 months or 6.7 years to reach our goal. To make it more achievable we could cut some of our spending on eating out or on streaming services and put that toward savings.

R - Relevant

  • Is this a worthwhile goal?
  • Is it the right time to work toward this goal?

T - Time Frame

  • Make time-bound goals.
    • What can I do each week?
    • What can I do each month?
    • What results can I see in 6 months?
    • When do I expect to be completed with my goal?

EXAMPLE 1: I think I can realistically lose 3-4 pounds a month, so it will take 8-10 months to reach my goal.

EXAMPLE 2: Based on saving $500 a month it will take 7 years to reach our goal, but we want it to take 5 years. By cutting down streaming services and eating out we could save $680 per month and be done with our goal in 4.9 years!

Now practice setting your own goal using these 5 factors. What is something you've been wanting to make happen? Financially Fit also offers more resources on Smart Goal Setting to members under our "tools" section. Feel free to read more information or reach out with questions. Our team is here to help!

Wednesday, November 10, 2021

Budgeting: A 5 Step Guide for Beginners

Budgeting is the "regular check-up" of the financial world, but it is just as important to your health as those physical checkups. In an earlier blog, we discussed the health effects that financial stress can bring.  Getting started on your budget can decrease this stress by increasing your opportunity to save money, pay off debt, and meet your goals. Here are some basic explanations and 5 easy steps to help anyone
complete their first budget.

In a budget, you track 3 basic things: money entering your accounts, money leaving your accounts, and your financial goals.

Income can include your regular paycheck, side hobbies that bring in money, investments, scholarships, gifts - anything that adds money to your account. Expenses, on the other hand, are anything that you spend money on. They can be broken up into 2 categories.

  • Fixed expenses are reoccurring monthly costs that are the same each month. 
    • This includes things like rent or mortgage payments, car payments, class fees or membership fees, and any subscriptions you have
  • Variable expenses are things that cost different amounts each month or don’t regularly occur. 
    • This includes things like utilities, groceries, clothes, gifts, eating out, travel expenses, and car repairs. Some variable expenses are fairly regular, but some are unexpected.

Steps to Follow:

  1. Gather your financial records.

    Having all your information collected makes writing everything down much faster. This process can include getting bank statements (paper or mobile), receipts, checks, etc. 

  2. Begin by writing down your income because this is generally the easiest step. 

    • Start with your regular income
    • Then look at income from any investments
    • After that, focus on side jobs or hobbies
    • Lastly, look at any other source such as gifts, scholarships, or government grants.

  3. Write everything you spend money on. 

    This is where you pull up your credit card statement and jot everything down. It can be easier to track spending weekly, so the end of the month feels less overwhelming. Then there isn’t one day where there is everything to document.
    • Start with your fixed expenses because these are straightforward. What do you make payments on? What subscriptions or membership fees do you have? What is your rent or mortgage payment? What other expenses are like these?
    • Then move to variable expenses since these require more digging. This category includes everything that your fixed expenses missed. Exactly how much did you spend on groceries? on eating out? Did you have any car trouble or unexpected expenses? Did you do any traveling? How much was gas this month? 

  4. Subtract your expenses from your income to see the total that you have remaining.

    This is called your “net income.” This money is what you can put towards savings or debt reduction! Savings can include fun things like a toy or a trip, holiday savings, an emergency fund, or other things you want to budget for. Debt reduction focuses on making payments toward any loans or debt. This could be increasing your car or mortgage payments to pay it off faster. It could also be working on paying student loan debt.

    If you don’t like what you see, you can seek help in ways to cut expenses or ways to increase your income. FFMe offers financial counselors that can walk you through this process one on one.

    For many families, this process can start with decreasing spending on eating out. It can also be limiting the number of subscriptions you have. 

  5. From your net income, you can start setting goals for your finances.

    We will be sharing more on goal setting next week, but for right now, focus on figuring out what you'd like to save for or what debt you want to focus on.

If you need help thinking of what to write or how to track it, Financially Fit Me offers a simple budgeting worksheet under “tools” to help you get started. To access it, register for a free account on our website. This worksheet has a spot for you to enter everything in, and it does step 4 for you automatically. Start budgeting this week, and see how your finances improve.

Visit Financially Fit Me at https://financiallyfitme.com/

Wednesday, November 3, 2021

Saving Starts With Budgeting

    Planning for big life milestones like buying a house, having a baby, buying a car, retirement, and emergencies are important to feel secure. For most of you, your savings account probably looks a lot like your budgeting right now (and that could be good or bad). This is because the first step to saving money is understanding how much money you have and where it goes. This is a budget! In its most basic form, a budget details out how much we make in a given time, how much we spend, and what we spend it on. It can feel tedious sometimes, but doing this regularly can change your life. When you write out everything your spend, you can easily recognize spending trends and make changes. It also forces you to face the reality of your expenses. 

While 4 streaming services may feel necessary, spending $60 a month on TV is much less appealing. If you got rid of cable because it was too expensive, why are you spending more than that on streaming subscriptions now?

    If this doesn’t relate to you, you might think “Wow those kinds of people are silly!” but everybody has their own spending struggles.

Maybe other people need to look at their spending on eating out? How many times a month are you eating out? This includes snacks and coffee. Maybe it doesn’t feel significant at the time, but It’s crazy how fast those 4$ items add up, huh! All of a sudden, you’ve spent 100$ on food that you could have made at home for $50. 

    This doesn’t mean don’t eat out or don’t buy subscriptions. It just means that being aware of how much you spend and what your options allow for informed decisions. When you have your budget completed, you can see how much money you have left at the end of each month to save or to pay debt and this can help you make informed goals. It can also help you find things you’d like to spend less if you are looking to save more than what’s currently available. 

    Register for a free account with us, and you can access a budgeting sheet to help you get started. There is even a basic savings sheet to help you make goals and see how many months it would take to reach them. 

If you have any questions, feel free to reach out. We would be more than happy to help you.

Wednesday, October 27, 2021

How Does Financial Stress Impact You?

    According to a survey done at CreditWise from Capital One, finances are a leading cause of stress. 73% of people surveyed have more stress from finances than from work, family life, or politics. 

Do you see this in your own life? How about in the lives of your friends or coworkers?

When looking younger generations, it increases to 82% of people experiencing financial stress. Whether you personally are experiencing financial stress, or you have friends or family members who are, it is important to understand the impacts that it can have. 

    People can experience stress because of specific events or ongoing issues, and it can vary in intensity. An article by the Mayo Clinic explains what happens inside people when a stressful event occurs. When experiencing stress of any kind, various hormones are released in our brains. Our adrenaline and our cortisol levels are increased. This elevates heart rate and blood pressure, as well as increasing sugar in the bloodstream. All of these physical changes aid in the "fight-or-flight" response by helping us have faster reactions. In addition to the above responses, cortisol also also alters the immune system's ability to respond and it suppresses digestion and the growth process of cells. While important in immediate and dangerous situations, these physical effects of stress can be damaging over long periods of time.

Long term stress can lead to:
    - anxiety 
    - depression
    - digestive problems
    - headaches and migraines
    - muscle tension and pain
    - heart disease, heart attack, high blood pressure and stroke
    - Sleeping problems and insomnia
    - weight gain
    - memory and concentration impairment

    Do you see any of these health issues in your life or in your friends? It may be due to financial stress.

    In the CreditWise survey mentioned above, many people reported being hopeful that their finances will improve over the next year (53% of people) and 59% of respondents said they would like to learn more about financial tips and improving their credit score. Many people want to improve their situations but don't know where to start.

    This is where a financial advisor comes in. By getting personalized financial coaching, people can learn to properly manager their finances Having the right support can make the world of change.With coaching, people that are struggling can receive the help they need to stabilize and improve their financial state, leading to a decrease in stress and the associated health issues. 

    We offer a free account at our website with tools to get you started. As well, there is one-on-one coaching for a small monthly fee.

If you want to learn more, visit our website at https://financiallyfitme.com/

Monday, September 27, 2021

How is Gen Z Learning About Personal Finance?

As the generation who has been raised with technological advancements, Gen Z is now using social media for financial education. GOBankingRates asked 1,000 Americans aged between 18-24 about their approach to personal finance. This survey found that 38.8% of Gen Zers use TikTok, YouTube, or other social media platforms to learn about personal finance. To be more specific, 34.3% learn from TikTok and YouTube, and 7.2% learn from other online techniques, like Reddit. On the flip side, only 22.7% responded they’re learning from other family members and 17.6% are learning from educational classes at college/high school. 

To learn more about how Gen Zers are investing their money, what they’re spending money on, and what they want the most out of their professional life, please visit www.gobankingrates.com

Don't forget to follow us on TikTok! @financiallyfitme

Written By: Your Financially Fit Me Team

Monday, September 20, 2021

Coping with Financial Stress

Maurie Backman from The Ascent wrote about some tips and tricks on how to minimize financial stress. Here’s what she had to say:

  1. Maintain a Solid Emergency Fund: Backman admits that her personal emergency fund is extremely strong in fear of unplanned financial burdens. She claims that it’s typical of her to save at least a year’s worth of expenses/bills. She admits that it’s probably safe to have a little less than that, but it’s encouraging to have left over savings for investment opportunities. Regardless, it’s better to be over prepared than under, and she claims that keeping a year’s worth gives her significant peace of mind.

  2. Under Budget Home Owner: Backman references the rule of thumb to limit your monthly housing expenses to less than 30% of your income. If you’re looking to buy a home in the near future, analyze your annual income and make sure you aren’t spending too much on home expenses, or else there won’t be much left over for recreation, food, or investing. 

  3. Revise your Budget: To ease your worries, Backman suggests updating and revising your budget often to account for rising expenses. Checking in often is a great way to be confident in your financial status and ensure you have enough money. 

To read more from Backman, please visit www.fool.com.

Written By: Your Financially Fit Me Team