Measure Your Financial Body Fat

It’s mid-January; do you know where your New Years Resolutions went?

Hard to believe that the holidays were just 2 weeks ago.  Usually by mid-January, the mild depression caused by lack of sunlight that grips most of us in the Northeast is in full effect.  This year it’s that plus the flu.  No wonder, then, that many of us have discarded our New Years Resolutions like some forgotten grocery list dropped on the floor of the Times Square subway.

Picking up the pieces of our New Years Resolutions

Picking up the pieces of our New Years Resolutions

But even if you got sidelined by the flu and haven’t been able to make it into the gym yet, or maybe went to Macy’s with the $100 gift card you got for Christmas and accidentally left with a couple of pairs of boots, three cable-knit sweaters, a blender and a European-style mattress, don’t let a little bad behavior stop you from making good on the promises you made to yourself.

One of the top three resolutions has to do with money.  People vow to get out of debt, save more, or start investing.  Setting financial goals is always top of mind for most people.  And like the other top resolutions–losing weight, becoming a “better person (whatever that means) or volunteering (good luck with that!)–nothing will be achieved unless you set goals, make a plan and work towards those goals.

But before you go transferring your entire savings account into your 401k, or opening an online brokerage account and depositing last week’s unemployment check, or saving up for a Bloomberg station so you can start day-trading…chillax.  Think of the old adage “you don’t know where you’re going ’til you know where you’ve been.”  In other words, determining your financial foundation first helps you understand yourself better and your attitude towards money which in turn will help you set–and achieve–better financial goals.

Recently, I joined a new gym.  I’d been going to the good ol’ run-of-the-mill gym for years and was tired of the broken machines, humid conditions and questionable stains embedded on the “clean” towels.  This new gym is beautiful, shiny, sleek; it’s the gym that the one-percenters go to, and even though I am not currently a one-percenter, this gym gives me access to this special status, if only for 3-5 times a week.

The one-percenters on treadmills

The one-percenters on treadmills

With my new gym membership , I’m entitled to a couple free personal training sessions.  I recently met “Tareeq,” a tall Dominican glass of water who approached me in the gym and pretended to flirt with me so that I would make an appointment with him (yes, that’s what they do, those wily personal trainers; they flirt with you and flash smiles in hopes that you will hire them as a trainer!  And of course it works.)

Last week was my first session where we basically took my measurements, did a fitness test and talked about my goals…basically a humiliating start to my Friday.  Funny how I started out the session pretty optimistic, cracking jokes, telling Tareeq that my weight “ain’t nothin’ but a number, just like my age, know what I mean?  Haha!” And then by the end of the session, after I had ran, walked a steep incline, attempted push-ups, sit-ups, gotten my fat pinched in various parts of my body and then stepped onto a scale–I was depressed and quiet.  My goals had changed.  I had walked into the session thinking, ‘I feel good, just want to tone up my lower body, and have fun working out’ but after I had evaluated my present state of health and fitness, I wanted more.  I wanted to lose weight, strengthen my core, lower my blood pressure, burn more fat during a workout, fix the sag situation in various parts of my body.

When it comes to finance, just like in fitness, we often make lofty goals without truly evaluating our situation and our attitudes–and as a result fall short of our goals.  By establishing a financial foundation first, you get a better idea of your good and bad habits, and the areas in your finances that need immediate attention; this leads to setting the right goals and the steps to tackle these issues.

This first step in setting a financial foundations is to understand yourself.

1. Be mindful.  In yoga, we’re aways reminded to be mindful of things.  “Be mindful of your breath.” “Be mindful of thoughts for they turn into actions which turns into the truth yadda yadda.” “Be mindful that you don’t scrunch your neck in downward dog.”

I am very mindful of this beautiful sunset.

I am very mindful of this beautiful sunset.

These are small reminders that can be extremely important to the practice of yoga and to receiving the full benefits of a pose.  When it comes to money, we should also be mindful of our actions and reactions to money-related matters.  How do you feel when you get your credit card bill in the mail? Do you instantly cringe and throw the bill in a  desk drawer, only to be found sometime in mid-August?  Or do you react in the opposite way, panicked by a fear of debt, spend your whole paycheck on bills and leave yourself with a twenty-dollar bill for the rest of the month?

What is your current state of debt?  What is your monthly income?  What are your fixed expenses that you need to live on per month?  Find these numbers and memorize them.

2. Change your attitude.  Many people approach money issues with a sense of fear.  I’ve heard people complain that they don’t understand finance, it’s complicated or boring.  Others don’t want to delve too far into their finances for fear that they’ll discover how majorly dramatically horrifically in debt they are (which is probably not the case).  Still others may think they don’t have anything to worry about because they’re too young, don’t earn enough money, or have someone else make money and investing decisions for them, etc.

First of all, take a good hard look in the mirror and acknowledge how you feel about money, debt, retirement planning and investing.  Are you afraid to ask questions at the bank, or talk to a financial advisor because you feel like you don’t make enough for someone to care about your questions or accounts, or because you don’t want them to think you’re stupid or because you don’t want them to sell you something?  My advice: walk into the bank like a gangster.  Act like you own the place.  Look at the bank advisors like they work for YOU.  I mean, they don’t, but if that’s what it takes to get you to change your attitude, tell yourself those lies!

Think of yourself as the Godfather and your financial advisor as your trusted Consigliere.

Think of yourself as the Godfather and your financial advisor as your trusted Consigliere.

The opposite of fear is confidence.  It is incredibly empowering when you can overcome your fear–or maybe even just ignore it or side-line it–in order to start a conversation with an advisor, ask questions and take control of your money (and not the other way around).

3. Create a process that works for you.  Let me start by saying that I hate math.  Anything that has to do with numbers–even the calculator on my Iphone–is extremely puzzling to me.  I am often stumped when someone asks me to times a number by 10.  So when it comes to establishing a budget and managing my finances I don’t use an Excel spreadsheet.  I like things spelled out, so I gravitate towards specialized programs like Mint.com, and I also like keeping good old-fashioned notes in a notebook (or on my Iphone).

Some couples use the envelope method to manage their household finances.  They stuff money into envelopes dedicated to certain parts of the household budget and anything left over from fixed expenses can be used for the variable expenses like entertainment, big purchase items or hair extensions.  I have a friend that lives and breathes Excel.  She uses Excel at work of course, to manage her household budget and bills but also to manage expenses on a group outing, for vacation expenses, even for shopping.

No one process works for every person; you have to find the method that is convenient, easy to use and something that you’ll stick to.  And then stick to it.

Establishing a financial foundation, like fitness, is a simple (sometimes painful) process that can lead to establishing the right goals.  Once you know “who” you are–with regard to your attitude, your fears and your habits towards money–you can set real goals based on that reality.

Your financial foundation can also be a great scare tactic that inspires you into action–kind of like what happened to me after my fitness test last week.  I was back at the gym every day this week, and even tried some exercises Tareeq showed me.  He would’ve been so proud if he saw me on that treadmill–but he was too busy flirting with a new member at the juice bar.

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