Financial Fitness

Thanks for sharing this!

Heads up! It’s time for a financial fitness check.

  • Is your emergency cash stash underweight?
  • Are your assets covered?
  • Have your returns started sagging?

If you answered, no, yes, no, it’s likely you’re in good shape. Any other responses mean you may need to buff your finances. Here are some exercises to get you started.

Pump up your emergency funds. Want to increase your heart rate? Imagine losing your main source of income tomorrow. Would you have enough cash on hand to carry you until your situation improved?

How much cash is “enough”is a combination of your usual monthly bills and the length of time you’d need to depend on your savings. To estimate the amount, add up essential expenses—the ones you can’t afford to miss, like the mortgage, car payment and groceries. Multiply the sum by the number of months you’ll be without income. In a thin job market, that could be half a year or more.

If the total you come up with is less than the cash you have stashed in a money market or savings account, you could be setting yourself up for problems.

Test the health of your insurance. Two aspects to consider: that you have the right kind of insurance, and that you have enough.

The right kind protects your most valuable assets—your home, vehicle and health. Enough means your coverage is in line with the value of those assets. For instance, coverage limits on your homeowner’s policy may be updated by a set percentage each year. If the homes in your neighborhood are not appreciating as rapidly as the insurance company calculates, you might have more coverage than you need.

Firm up your portfolio. Automatically depositing money into your mutual fund, DRIP plan or retirement account, then leaving the monthly statements unopened is like buying exercise equipment and storing it in the garage.

Keep your portfolio returns healthy by knowing what you own, and using that knowledge to maintain a balanced mix of assets. For example, you could complement a stock index mutual fund with a bond fund.

Caution: Buying three or four mutual funds does not necessarily create a “balanced” mix. That’s because many funds hold similar investments. Read the fund information to avoid loading up on the same assets in different funds.

Now take a deep breath and congratulate yourself. You’ve just completed your first financial fitness workout. Isn’t it a great feeling to know you’re shaping up your finances and building your wealth?

You might also like these posts

Article – Preparing for Hurricane Season Image source: By Nilfanion , via Wikimedia Commons. The map shows the tracks of all tropical cyclones which formed worldwide from 1985 to 2005.The Atlantic hurricane season begins June 1. While the 2014 season is expected to be a mild one, mild doesn’t mean storm-free. Getting ready early is a good idea—and early preparati...
Article — Locked Out Image source: UK, public domain, via Wikimedia Commons What’s on your computer? Your manuscripts? Work? Photos? What would you do if you were denied access to those files—if you were locked out by rogue hackers? If you’re shaking your head because you think nothing on your computer is of value to hackers, consider th...
Article — Tax Identity Theft Awareness Week Image source: ftc.gov Taxes are scary enough, without adding tax identity theft to the mix. The costs—$3.6 billion a year according to an estimate by the US Treasury Inspector General for Tax Administration—are scary, too. Unfortunately, both tax ID theft and the costs are on the rise. The US Federal Trade Commission...
Article — Your 2013 Federal Income Tax Return Image source: IRS.gov Whether you’re a part- or full-time freelancer, receiving income means filing a tax return. Here are three things to keep in mind as you look back at your 2013 business activity. Dates: The IRS will begin accepting 2013 business returns on Monday, January 13, 2014. For individual returns, the da...

We write. Visit us in Carpenter Country, a magical place that, like our stories, is unreal but not untrue.

Posted in Articles Tagged with: ,