Defensive Financial Moves help Win the Financial Fitness Game

Defensive Financial Moves help Win the Financial Fitness Game

Financial fitness is my number one focus on behalf of my clients. That means helping them understand money and the way it works.

To help my clients understand the concept of financial fitness, I’m sharing the ideas found in a book called Financial Fitness: 47 Principles by Chris Brady and Orrin Woodward. The book highlights every aspect of financial fitness that you can master to help improve your financial situation and begin to build a stronger financial future. There are a number of very valuable principles in the section of the book called Financial Defense.

Financial defense means caring for your resources and protecting against loss or decline. In this blog, I’ll talk about the second half of the authors’ principles for defensive financial fitness.

But first, I want to focus a little more deeply on principle #29 from the first set of defensive financial fitness principles I discussed in the last article: see a car as transportation, not as a status symbol.

Avoid Putting your Car in a Position to Jeopardize your Financial Health

One couple I know has an annual income of $100,000 and their monthly car payment is $1,200. One of their car payments alone is a $724 payment. The reason they have taken on these excessive car payments is that they think of their cars as status symbols, and it is jeopardizing their financial fitness.

It might be tempting to justify large car payments, with the idea that your car is important to your professional success. However, unless you are someone whose primary work is chauffeuring business executives and celebrities, your car’s primary role in your life really is simply to provide safe transportation from point A to point B.

If you can change the way you think about your car and the payments you make on a car loan, you will free up a big chunk of income to be used for your choice of many other more effective ways to strengthen your financial future.

I’ve shared this principle with my clients, and they are taking steps to change this habit for the future. I’m looking forward to helping them get financially healthy, so they can buy a new home.

More Defensive Financial Fitness Principles to Help Build a Financial Foundation

If you have read the previous articles in this series, you already know about the basics of financial fitness, as well as offensive moves you can make to strengthen your financial position. The last article covered the first half of Brady and Woodward’s defensive financial fitness principles. In this article, the last of the series, we share the last half of the authors’ defensive financial principles.

Financial Fitness Principle #33: Use the roll-down method to pay off all credit card debts
With this method, you use your extra income to first pay off credit card debts, because they are the ones that can cause the most destruction, or at the very least block, your future financial health. Once you have paid off all credit card debt, then you can use the same extra income to pay off other debts, such as secured loans.

Financial Fitness Principle #34: Learn to be skeptical of advertising, media and marketing
The world is full of wonderful opportunities and tools you can use to improve your life and help you reach your goals. However, the aggressiveness of advertising and marketing within an ever-growing list of multiple media outlets can put pressure on our sense of good judgment. Don’t believe everything you hear. Any given product is a great idea for someone, but not every product will be a great idea for you.

Financial Fitness Principle #35: Accumulate slowly
As you work to build a secure financial future, it’s critical to abandon any goal you might have to accumulate “stuff.” Instead, get in the mindset that your goals should be to accumulate something else that can provide even more satisfaction and happiness: resources and wisdom. Think of the peace of mind you could have if you gain first-rate financial fitness, including a nest egg and knowledge that will serve you well for the rest of your life.

Financial Fitness Principle #36: Get right with God and apply godly principles in all areas of life
There is so much to be said for approaching life and finances from a spiritually strong position. The basic principles of faith help you reach the right goals, such as good stewardship and serving others. Leave the impressing of others in God’s hands, and focus instead on living life in ways you can be proud of.

Financial Fitness Principle #37: Do not use consumer debt
Consumer debt is like a cancer that begins small and grows until it consumes and destroys your financial health. Cut out that destructive cancer! Wise financing is occasionally a good idea as a smart business investment, but buoying your financial position artificially with consumer debt is not a good idea.

Financial Fitness Principle #38: Make memories a part of your lifestyle, budget and life plan
Being a good financial steward does not mean abandoning the satisfying events of your life. You don’t have to wait until you are financial stable to make memories. In fact, if you try to stop living a fulfilling life until you are financially stable, you probably will not be able to sustain the effort. Memories are important payoffs for your hard work. However, keep them in alignment with your financial position. That means starting small and building up to bigger memories. Make sure big memories are a part of your plan, too.

Financial Fitness Principle #39: Be very, very careful with danger zone decisions
Certain aspects of your financial fitness hold more potential to go wrong than others. Here are the most common danger zones: taxes, home ownership, divorce, credit cards, lawsuits, insurance, seeking status, college, addictions, and investments. Here’s how to overcome the element of danger: Get good advice from your financial mentors and study each situation carefully before you take action.

Financial Fitness Principle #40: Follow the 2X rule for buying a home
This principle is very simple. It’s a rule of thumb that can help keep you living within your means. Don’t buy a home that costs more than twice as much as your annual income. For example, if you make $50,000 a year, don’t buy a house that costs more than $100,000. Want a bigger home? Then make it your goal to increase your income.

Financial Fitness Principle #41: Do not buy costly “toys” until you are financially fit
So many people believe when they earn more money they deserve the finer things life can buy. However, if your finances are not in order yet, the truth is that you do not deserve any costly toys. If you get the toys anyway, it means you are using your debt and savings on the wrong things. On the other hand, if you have done a good job of paying off debt, building a savings and following other smart financial principles, and if you have the cash available, you can buy a few “toys” and still remain financially fit.

This brings my blog series on financial fitness to a close. I hope you have enjoyed learning about the basics of financial fitness, as well as the offensive and defensive actions you can take to strengthen your financial health and help you win the financial fitness game in your own life. If you have questions about any of these articles, or would like help understanding the principles and building good habits in your own life, please don’t hesitate to contact me.

Here’s to your financial fitness…starting today!

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.

The Importance of Taking Action to Achieve Financial Fitness

The Importance of Taking Action to Achieve Financial Fitness

It’s important to understand that your mortgage could be your largest financial investment. 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 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 a section called Financial Offense that contains 17 very useful principles. In my last article, I discussed the first half of the authors’ principles for financial offense. In this blog, I want to highlight the second half of those principles.

But, before I do that, I want to expand a bit on a principle we covered in the last article, because I think it is one of the authors’ top three principles: principle #14, financially fit people analyze their life and financial habits.

Analyze your Life and Financial Habits for Better Financial Health

In the mortgage business, I see people who fall into a cycle of debt and I see people who fall into a cycle of savings. I’ve also seen many clients break their bad habits and start planning and saving. They get into a mindset of helping themselves prosper, which helps them achieve financial freedom.

They do this by constantly analyzing where their finances are and thinking of ways to improve their situation. They get help if they need it, and surround themselves with people and tools that encourage them to maintain the positive new habits they have acquired.

Let me repeat: The key is building the habit of making good financial decisions, so you put yourself in a cycle of savings instead of a cycle of debt. I believe anyone can do this at any stage in their financial lives.

More Intentional, Offensive Plays to win the Financial Fitness Game

The previous article covered the first half of 17 offensive financial fitness moves presented by Brady and Woodward. This article will cover the remaining offensive actions you can take to intentionally build your financial strength.

Financial Fitness Principle #17: Retirement is not about age; it’s about passive income
We all think of a certain age at which we expect to retire, but rather than using age as a measure of readiness for retirement, we should instead begin to think in terms of the amount of passive income we have to live on. Even if you are young, you could retire—which simply means retiring from doing things that are not a part of your ultimate purpose in life. Once you have enough passive income, you can focus on your real life’s work.

Financial Fitness Principle #18: Make a plan and focus deeply on each step
Several of the principles above can be combined to create a focused plan to get you to a destination most people crave: financial success. To reach financial success: 1) find a way to excel at your job and start a small business; 2) put in 10,000 hours to gain mastery over your business and financial fitness; 3) build enough passive income to cover your family’s needs; 4) once you are financially free, focus on building financial strength to fund your life’s purpose.

Financial Fitness Principle #19: Get good mentors and really listen to them
If you tried to learn every financial principle on your own, it could take generations. That is what it has taken for our society, by trial and error, to uncover proven principles of financial fitness. Instead of reinventing the wheel, choose financially successful mentors and intently listen to everything they are willing to teach you.

Financial Fitness Principle #20: Use money in ways that bring you more money
When you make choices about how you will use your money, identify the choices that could bring you more money than you put in. The best investment for you is yourself and your own business. Find ways to wisely and appropriately use some of your savings to increase your assets and returns.

Financial Fitness Principle #21: Put some money into preparing for a worst-case scenario
Emergency funds are critical, so when something unexpected happens you aren’t sabotaging your long-term plans. Some people save fanatically for a rainy day—don’t overdo it. But don’t ignore it. Emergencies happen to everyone.

Financial Fitness Principle #22: Build up a regular targeted savings fund for future expenditures
Compounding interest works in reverse, too. Financing consumer items, such as furniture, cars and vacations—even education—eats away at your financial strength for the future. If you know you will need a consumer item in the future, begin today to build a targeted savings account to pay for it, so you can eliminate the cost of interest.

Financial Fitness Principle #23: Only invest money you can afford to lose entirely
The shiny temptation of investment in popular industries or favorite brands leads many people to sink too much money into industries they aren’t familiar with. Doing this can greatly increase your chances of losing money. For that reason, invest only small amounts in speculation outside of your area of mastery.

Financial Fitness Principle #24: Don’t ever use your savings to speculate
If you speculate with savings earmarked for specific uses, it’s like gambling away your grocery money. Avoid it at all costs.

Carefully studying and finding ways to take the offense and implement these financial moves could help you gain financial fitness sooner and more confidently. You can’t do it all today, but you CAN get started today.