Savings Fitness A Guide To Your Money and Your Financial Future

Content Highlights

A Financial Warm-up

Your Savings Fitness Dream

How's Your Financial Fitness?

Avoiding Financial Setbacks

Boost Your Financial Performance

Strengthening Your Fitness Plan

Personal Financial Fitness

Maximizing Your Workout Potential

Employer Fitness Program

Financial Fitness for the Self-Employed

Staying On Track

A Lifetime of Financial Growth

A Workout Worth Doing

Resources

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Savings Fitness:
A Guide To Your Money and Your Financial Future

Your Savings Fitness Dream

Getting Fit...
Managing Your Financial Life

It starts with a dream, the dream of a secure retirement. Yet like many people you maywonder how you can achieve that dream when so many other financial issues have priority. Besides trying to pay for daily living expenses, you may need to buy a car, pay off debts, save for your children's education, take a vacation, or buy a home. You may have aging parents to support. You maybe going through a major event in your life such as starting a new job, getting married or divorced, raising children, or coping with a death in the family.

How do you manage all these financial challenges and at the same time try to "buy" a secure retirement? How do you turn your dreams into reality?

Start by writing down each of your goals on a 3"x 5" card so you can organize them easily. You may want to have family members come up with ideas. Don't leave something out at this stage because you don't think you can afford it. This is your "wish list."

Sort the cards into two stacks: goals you want to accomplish within the next 5 years or less, and goals that will take longer than 5 years. It's important to separate them because, as you'll see later, you save for short-term and long-term goals differently.

Sort the cards within each stack in order of priority.

Make retirement a priority! This needs to be among your goals regardless of your age. Some goals you maybe able to borrow for, such as college, but you can't borrow for retirement.

Write on each card what you need to do to accomplish that goal: When do you want to accomplish it, what will it cost (we'll tell you more about that later), what money have you set aside already, and how much more money will you need to save each month to reach the goal.

Look again at the order of priority. How hard are you willing to work and save to achieve a particular goal? Would you work extra hours, for example? How realistic is a goal when compared with other goals? Reorganize their priority if necessary. Put those that are unrealistic back into your wish list. Maybe later you can turn them into reality too.

We'll come back to these goals when we put together a spending plan.

Beginning Your Savings Fitness Plan

Now let's look at your current financial resources. This is important because, as you will learn later in this booklet, your financial resources affect not only your ability to reach your goals, but your ability to protect those goals from potential financial crises. These are also the resources you will draw on to meet various life events. Calculate your net worth. This isn't as difficult as it might sound. Your net worth is simply the total value of what you own (assets) minus what you owe (liabilities). It's a snapshot of your financial health.

First, add up the approximate value of all your assets. This includes personal possessions, vehicles, home, checking and savings accounts, and the cash value (not the death benefits) of any life insurance policies you may have. Include the current value of investments, such as stocks, real estate, certificates of deposit, retirement accounts, IRAs, and the current value of any pensions you have.

Now add up your liabilities: the remaining mortgage on your home, credit card debt, auto loans, student loans, income taxes due, taxes due on the profits of your investments, if you cashed them in, and any other outstanding bills.

Subtract your liabilities from your assets. Do you have more assets than liabilities? Or the other way around?

Your aim is to create a positive net worth, and you want it to grow each year. Your net worth is part of what you will draw on to pay for financial goals and your retirement. A strong net worth also will help you through financial crises.

Review your net worth annually. Recalculate your net worth once a year. It's a way to monitor your financial health.

Identify other financial resources. You may have other financial resources that aren't included in your net worth but that can help you through tough times. These include the death benefits of your life insurance policies, Social Security survivors benefits, health care coverage, disability, insurance, liability insurance, and auto and home insurance. Although you may have to pay for some of these resources, they offer financial protection in case of illness, accidents, or other catastrophes.