How to Achieve Financial Fitness

Achieving financial goals is similar in many ways to reaching fitness goals. Building financial fitness is a long term project that needs to become a habit, like your daily run.

financial fitness

No Comparisons

Eliud Kipchoge is the world record marathon runner, covering 26 miles in 2:01.18. There is little point in comparing this man’s incredible athletic ability with my novice running.

For the vast majority of us running a marathon, winning the race is not a goal or realistic possibility. The aim in running a marathon is to achieve the distance. We may aim to beat our personal best, but comparing ourselves with other athletes is a bit pointless. They may have better genetics, run hundreds of marathons before, or be running dressed as a chicken.

Personal finance is similar. It is a common error to compare financial fitness with friends, family or colleagues, and risk becoming demoralised. You have no idea what hands up or handicaps your friends may have been gifted.

Looking rich with flashy consumer goods is very different from achieving real wealth. It is, quite frankly none of your business how anyone else is doing financially. Stick to your lane, focus on you and your immediate family’s goals.

No Excuses. Just Do it.

Kipchoge has form. He won the Berlin Marathon in 2015, despite his shoes failing just 10km into the race. He ran the remaining 32km with his insoles flapping out of both shoes, to finish with bloodied, blistered feet.

There are countless other examples of the power of pure bloody stubborness in achieving goals against all odds.

If we don’t achieve our goals, realistically most of the time, it wasn’t that high a priority. Problems occur, barriers materialize, and often priorities change as a result.

The reason most do not achieve their (realistic) fitness or financial goals, is because they don’t prioritize them.

Procrastination

Another good reason for not achieving fitness or financial goals. Have you evert put off working out repeatedly until it’s too late to complete it? Guilty! Whether it’s work, exercise, study or investing it’s easy to put it off if it seems difficult or unappealing.

Reader, you have probably already discovered that when you eventually get that dreaded job over and done with, it is usually much easier and faster than expected. How many times have you procrastinated for hours over a 10 minute job you were dreading?!

It’s easy and common to procrastinate when it comes to investing. The world of investing can seem intimidating. Many lose out on years of returns because investing just seems too hard.

Put the time aside needed to work out your goals, financial plan and basic asset selection. Perfect is, as usual, the enemy of good. Get it done and you can always improve it later. But if you don’t get started, there is a risk you never will.

financial fitness

Financial Fitness: Planning or Doing

It’s important to build your financial literacy. But don’t let learning delay investing more than a few weeks. Planning can easily turn into procrastination. Ever spent hours making an incredible, detailed (and perhaps even decorative) study plan? (ahem)

Set a deadline by which you will make your first investment. Keep it simple, low risk and automated.

Regular Training – Building Financial Knowledge

Your initial knowledge acquisition stage should be basic, just enough to allow you to get started. But continue building your knowledge over time. Just like improving your bench press weight, improving financial literacy will not happen overnight.

A common pattern is to get excited about your new goals, consume everything you can find on the topic, and then losing interest. Pace yourself.

Similar to acquiring all the knowledge needed to complete your day job, financial literacy is collected little by little, in layers upon layers. This is far more effective learning than the cramming for exams we all have to do at times.

Knowledge needs to be understood, digested and internalized before the next layer can be added.

Similar to medicine, I suspect you could never run out of financial knowledge to learn. Warren Buffet, often called the best investor of all time, still spends hours reading daily.

Make learning a habit, and protect from yourself from losing interest completely. Subcribe to a blog, podcast or publication that will prompt you to read or listen a little every month.

As you learn more, your financial plan will evolve. Be careful not to change frequently every time you discover something new. Give the knowledge time to settle and find context. Weigh everything up carefully before changing plans.

Even if you plan to outsource your planning to a financial planner, you need basic financial literacy and a good understanding of your investments. The problem is, you need a fair bit of knowledge to know a trustworthy advisor from the other sort.

Automation Builds Habits

We are all only Human. Who really feels like working out when the alarm goes off an hour early in the morning?

Faced with the choice of making your planned investment or buying that new whizz bang TV on offer, which will you choose? Is your choice the one that will bring you most happiness long-term (hint: An even better TV will be out next year!).

With working out, and finances, for the mortals amongst us, as many barriers need to be removed as possible.

Work out clothes can be laid out the night before (Or even worn to bed), a work-out buddy provides accountability, even an app that records workouts provides some motivation.

The most powerful habit builder in investing is a direct debit. Whether it be to your savings account (only if still building an emergency fund, don’t get stuck here), broker account or mortgage.

It is easy to cancel if you really need the cash, but you are far more likely to stick to the plan if it occurs without your brain being involved every month.

Financial Fitness: Pace Yourself

Remember your first long distance runs at school? Inevitably, we all ran too fast (the enthusiasm!), only to run out of steam. Pacing yourself is as important in financial fitness as it is in becoming physically fitter.

Going all out with no money allowed for fun is probably not going to last. Make your plan realistic, allowing a set fun money budget.

Setting a fun money limit actually helps to prioritize the spending you really value. I find I’m far more ruthless cutting out low value spending, and enjoy treating myself even more when it is carefully considered.

Exactly how much fun money you allow, and how far you cut spending is very individual.

Most will not challenge themselves and continue spending money on expenses they don’t really value. So it’s worth stretching yourself with expense cutting to discover what you will really miss.

Truly valuable spending can be added back into the budget once you’ve proved you really don’t want to live without it.

financial fitness

Minimize Set Backs

Over training, or not having the right equipment can increase the risk of injury. Injuries significantly impair your training, and set you back on your schedule.

Financial mistakes can set you back years. Avoid scams at all costs, be suspicious and check everything.

Listen to those around you. Certainly not for their advice (unless you know for a fact they have achieved what you wish to) but for their mistakes.

People often blame the asset class, or instrument they used to invest in. Try and identify the avoidable errors that you can learn from. It’s probably best not to point them out (it’s a bit late!).

End result – Avoid the Anticlimax

Financial independence is a financial movement increasing in popularity involving mostly young high earners saving 50%+ of their income and investing until they can live off their investments in 10-15 years.

Some who hated their jobs have become completely obsessed with the goal of financial independence, to detriment of all else. After achieving financial independence, some describe a sense of anticlimax.

I’ve experienced the same after finishing a marathon I had been in training for months. I think it’s similar with many huge achievements, the real joy is often in the journey.

So make sure to maintain a sense of balance, enjoy your exercise, and have a plan for after the big event. Invest for the future, but don’t let it consume you. Remember to invest in life experiences along the way.

Financial Fitness Quiz

How Financially fit are you? Find out with Aussie Doc’s first quiz!

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

This Post Has One Comment

  1. Great parallel. Very true that you need to put some effort into your finances to get results. And just like exercise, it gets easier the fitter you get. Thanks for the read!

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