Strong Financial Defense: On the Front Lines of Financial Fitness

Strong Financial Defense: On the Front Lines of Financial Fitness

It’s important to understand that your mortgage could be your largest financial liability. It can have a drastic impact on your financial health today, tomorrow and even through retirement. In this day and age, I believe it’s important to bring financial awareness like this to my clients, so they can cultivate financial fitness. I see a lot of clients who are not financially healthy, and my goal is to educate them and make them aware of the tools they need to be successful.

I’m working with a book called Financial Fitness: 47 Principles by Chris Brady and Orrin Woodward that highlights every aspect of financial fitness. The book contains three sections that cover the principles you need to master to become financially successful. Previous articles in this series covered the basics of financial fitness, plus financial offense—actions you can take to intentionally grow your financial strength. The third section of the book is called Financial Defense. It contains useful principles for preventing and eliminating financial disasters.

Financial Defenses: Protecting your Right to Financial Fitness

Financial fitness means finding ways to protect the money you have and avoid losing it through non-constructive financial activities.

Financial Fitness Principle #25: Get rid of debt
This financial principle is one that almost everyone knows about, because nearly every person in today’s modern world has experienced the temptation of financing. In many cases, people would not have homes, cars or college educations without having incurred some debt. The point is to get rid of it as fast as you can and build a savings that keeps you from getting into debt. The faster you remove the negative influence of reverse compounding interest through debt, the faster you can move ahead toward your real financial goals.

Financial Fitness Principle #26: Don’t get caught in the trap of using business debt
If you aren’t financially sound, especially if you own your own business, you likely will consider many different options to patch up your financial situation. If your bank or credit union offers the opportunity to borrow money for your business, it often seems too tempting to pass up. However, business debt is no different from personal debt. It still must be paid back, and the build-up of finance fees adds an additional weight to the debt.

Financial Fitness Principle #27: Don’t use credit cards to build your credit
It’s true that using a credit card and paying it off will influence your credit score in some ways on the positive side. However, when you use credit cards in this way, you first must buy something, and it’s tempting to buy things you don’t need. It becomes too easy to justify expenses you wouldn’t otherwise undertake. The benefit of using credit cards is outweighed by the danger of growing debt.

Financial Fitness Principle #28: Never use borrowing schemes to pay for necessities
The world has many ways to get your money without a care for the impact of its loss on your financial fitness. Avoid borrowing “schemes,” such as title pawning, 90-days-same-as-cash loans, payday loans, rent-to-own plans and layaway debt.

Financial Fitness Principle #29: See your car as transportation, not a status symbol
The perceived need to own and drive a “decent” car causes many a consumer to overpay for a vehicle and put too much of a dent in his or her financial strength. Do not finance a car. Save up and always pay cash.

Financial Fitness Principle #30: Use debit cards or cash instead of credit cards
With a debit card, it is impossible to overpay and get yourself into debt. Make a commitment to use only cash or debit cards to limit your financial liability and build your financial fitness.

Financial Fitness Principle #31: Teach children and youth the principles of financial fitness
Good financial habits begin when we are young. Set a good example for children and mentor them from an early age, so they understand the power of money to strengthen or destroy their lives.

Financial Fitness Principle #32: Do not get sucked into using second mortgages
When people aren’t wealthy, they often find themselves looking for ways to improve their lot in life. With good financial analysis and planning, it can be possible! However, many people make the mistake of attempting to achieve financial improvement too quickly. It causes them to consider finance-heavy options such as second mortgages. Look at the charts and really think about how much a second mortgage will cost in the end. Can your financial health afford that big a hit down the road?

Both financial offense and financial defense are necessary to get you to the final goal: financial strength. Consider each of these principles carefully, and begin to take action on the ones you know you can handle today. Commit yourself to continually studying ways you can improve your financial position, and you will win financial fitness before you know it.