11 April 2017

How physical fitness helps create financial fitness

When it comes to staying fit, there are some obvious links between your body and your bank balance. Keeping a regular exercise routine delivers long-term health benefits, just like sticking to good money habits builds future financial security.  

Exercise might wear you out in the short term, but it leaves you feeling energised and alert – a helpful state to be when you're dealing with money matters. And the reverse is also true: being financially unfit can take a physical toll too. 

Edward Ware, spokesperson for Stepchange, a charity that helps people with debts, said “Debt can lead to several health problems and many of our clients report feelings of stress, anxiety and sleeplessness. It can affect every area of people’s lives, including relationships with friends and family and performance at work.”

People can end up relying on bad habits to manage anxiety, which don't really help. Smoking, junk food and alcohol can lead not just to health problems but also leave a hole in the wallet.  

Taking up exercise can help cut them down, giving both health and finances a boost. But just like preparing to run the London Marathon, you need a strategy to get fit, with some tricks to help you when the going gets tough.

Lose pounds, save pounds

“Habits that you need to get fit apply to financial fitness too. It's about creating good habits," suggests Simonne Gnessen, founder of Wise Monkey Financial Coaching. “Just signing up for a marathon, for some people, creates the motivation they need to get fit. The same applies to money. Use psychological tricks to create a motivator."

Firstly, create a cashflow: a schedule of money coming in and going out of your accounts, to work out what money you have left after essential spending on food, rent and household bills. Then, create a realistic budget. Add up your total income and take off essential spending. From what is left, decide how much you can save each month towards your financial goal and transfer it each month to a savings account.

Just like planning a training programme, budgeting helps clarify the task ahead. You'll know what you might have to sacrifice to meet your target. It takes discipline and organisation to stick to a budget, like sticking to a fitness regime.

“To be disciplined takes planning, effort and vigilance," says Maggie Baker, a psychologist and financial therapy specialist. “Like a battery, your energy needs to be recharged by doing activities that renew motivation and create energy."

So make sure to plan some treats into your training programme to reward you when you meet your targets.

Doing the Mortgage Mararthon

A marathon is a long race with peaks and troughs. Sometimes, you'll need to dig deep to reach your goal. In the same way, long-term financial fitness is not about making quick fixes but a sustainable strategy.

The best example of a long-term financial commitment that matches a marathon training regime is a mortgage. Buying your own home is often a 25-year commitment, and at first your annual mortgage statement suggests you're not making much progress, much like training for a marathon. 

This is because, to begin with, mortgage repayments are mostly made up of interest, with little capital being repaid. That's why it's important not to lose sight of the long term goal. And as you reach further towards the end of the mortgage term, you'll see the capital balance falls faster.

Beating stress, staying upbeat

One of the main blocks to reaching physical or financial goals can be stress. “Regular exercise releases endorphins in your body that helps boost self-esteem," says Baker. “When we feel good about ourselves we're more likely to face issues that may be difficult. So making an accurate assessment of your finances is more likely when you are energised and clear headed."

Regular exercise helps eliminate stress and improves your ability to sleep, which also reduces stress. And just like the rush you get from exercise, meeting your financial goals is a reward that's bigger than just your bank balance.

“When you match what you say you will do, it feeds into an overall belief that increases trust and belief in yourself," says Gnessen. “That has knock-on effects in all other areas, not just finances."

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