Are You Financially Fit?

04
May

Knowing where you stand financially is one thing. Having a healthy financial outlook is entirely different. How do you know if you are financially fit? High credit scores, low credit card balances and a healthy habit of saving money are good signs that you are in control of your personal finances, but you may be overlooking some important aspects of personal finances that could end up costing you a lot of money.

Taking care of your money and securing your financial freedom takes some work on your part. How do you measure up? Are you on the road to financial freedom or disaster? Not sure? Read on to find out what it takes to be financially fit.

Organization

Getting organized is the first task. It is impossible to know the state of your finances when your filing system is in disarray, or worse, non-existent.
• Keep what you need and toss the rest. Clutter can derail your budget faster than you may realize.
• Create a monthly bill organizer to track your due dates and pay your bills on time. This alone could save you hundreds and even thousands of dollars in late charges and interest rate increases.

Credit Management

Building and maintaining good credit is essential for financial fitness.
• Pay your bills on time. If you have past due or missed payments, get current as soon as you can.
• Apply for a credit card if you don’t have one. Use it to make small purchases and pay off the balance every month.
• Keep your credit card debt low. People with high credit scores will usually carry no more than 10% of their available credit in debt.
• Limit the number of credit cards you have to no more than two or three, fewer is better. If you currently have several, discontinue using them, but do not cancel them. More often than not, closing a credit card will have a negative impact on your credit rating.
• Do not open several credit card accounts at one time.
• Take care of any credit problems you have. Stop using your credit cards and pay cash. You may need to adjust your lifestyle and cut back on expenses in order to pay down your debt in a systematic way. By all means, you should be paying more than the minimum amount due on credit card balances.
• Protect your credit. You should check your credit report and credit score annually. You can obtain a free credit report once a year from the three credit reporting agencies, Equifax, Experian and TransUnion. You can purchase your credit score for $5 to $7 when you order your credit report. It is not necessary to go through one of the private companies that advertise on television or on the radio. These companies most likely will ask you to give them your personal information with the intention of sharing it with others. You should also report suspected identity theft and suspected fraudulent use of your account to the credit reporting agencies and the police. Close any bank accounts and credit card accounts if your information is lost, stolen or otherwise compromised.

Savings

Being financially fit means being prepared for the future. College tuition, retirement and emergency savings accounts are a must. Your health can also affect your security. If you have a high deductible health plan, consider opening a Health Savings Account to offset your out of pocket expenses.
• Regularly contribute to your retirement, and take maximum advantage of employer matched contributions.
• If you have college bound children invest in a Coverdell Education Savings Account and 529 plan for each child.
• Consider buying inflation indexed savings bonds, or I-bonds, backed by the government. They have a fixed rate of return and provisions to compensate for future increases in the Consumer Price Index.

Tax Planning

It is highly recommended to consult an income tax professional or advisor to help you take advantage of all of the tax deductions that are available to you, as well as to make sure there are no errors that could cost you interest and penalties. Do not wait for tax season to start thinking about your deductions. Keeping track of deductible expenses for home offices, charitable contributions, medical expenses, as well as contributions to health savings accounts and retirement plans is crucial. There are many seemingly insignificant expenses that could qualify for a miscellaneous deduction, such as union dues, tax preparation, uniforms and legal fees.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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