Improving your financial health
I married a dietitian and together we often draw a lot of parallels to each others field of expertise. I find it quite fun to relate our personal health to financial health so here are some of my most memorable parallels:
Simple not easy – discipline, work, effort is the key.
Like many people, I could stand to lose some weight. I often talk to my wife about how I need to lose weight and the funny thing is she says the same thing to me every time. “Jim, to lose weight, you need to do 2 simple things – eat less and exercise more.” These are two simple things I already know but as anyone can attest to, they are not easy to do. In the financial world, getting ahead is simply a matter of spending less and saving more. Again, two simple things that are not easy to do.
Related article: Building Wealth is simple, not easy
It’s all about developing healthy habits and changing bad habits.
To a certain extent, we are all creatures of habits. How many of you go to work the same way every single day? How many of you have 250 TV channels and watch the same 10 most of the time? How many of you have a wardrobe of clothes and you wear the same 20% most of the time? How many of you eat at the same restaurants most of the time? And order the same items off the menu most of the time? We all have habits, both good and bad. When it comes to health, it’s all about developing good habits in nutrition and activity and avoiding bad habits like smoking. When it comes to money, its about developing good habits on controlling and managing debt, understanding your spending, and developing a regular savings plan.
Related article: 7 Habits of Wealthy People
Cashflow and calories – Tracking makes a difference.
My greatest success in losing weight comes when I write down the calories of everything I eat so I can watch the total calories I take in each day. My wife says to me it’s no different than understanding what goes in and out of the bank account. “Jim, to be successful financially, you teach people to make sure they have more money coming into the bank account than going out.” She’s right; success comes in our ability to track and understand our cashflow (money in and out) just like tracking out calories.
Related article: Track your spending
Dieting and Budgeting are both bad words.
When I teach people about spending, I suggest the starting point is to simply know how much they spend on a month to month basis. In fact, I don’t think you need to budget or know all the details of where you spend the money. I truly think budgeting is a bad word, just like dieting is a bad word because they both imply restriction of behavior. The bottom line is you do not have to budget unless you have a spending problem, just like you do not have to diet unless you have an eating problem. The first step is to figure out you have a problem.
Financial education is like vegetables and exercise.
For a lot of us, financial education and planning is sort of like icky vegetables and daily exercise. We know we should do it. We know it’s healthy for us and for our families. But we’re tired, time-crunched, and tied up in old habits. Besides, is one greasier burger and fries going to kill us? Will taking a walk or hitting the bike really do all that much to help? Once you create a budget, you will discover what you already know: You need more money.
Financial education is one of those things we know we should improve on but it’s not fun. It’s not natural. And for many, it’s not enjoyable despite the fact that we know it is good for you. But sometimes, that’s just life!
Related article: Financial Education in the workplace
Success comes in finding balance and moderation.
I’ve read many studies that suggest a glass of wine a day is not bad for you. There are lots of diets that allow you a day in the week to enjoy your guilty pleasures like desserts or potato chips. The key to success, of course, if not to overindulge too often. In the finance world, debt is the biggest source of overindulgence as debt allows us to have more fun and live beyond our means. We’ve moved from a society of delayed gratification to delayed consequence because of access to debt. Once again, I will suggest you read an article from balancejunkie.com on how to deal with a debt hangover.
Investing is like making fruit salad.
May experts will tell you that the secret to investing is to have a plan. For me a plan is having a properly mixed portfolio of investments. I equate it to making fruit salad. The first thing you need to do when making fruit salad is to figure out what kind of fruit you want in your salad. I like apples, oranges, grapes and strawberries. My wife prefers mangos, melons and pears. As a result, we have very different fruit salads just like we have different investing styles and preferences. If I then want apple in my fruit salad, then I have to go and find 3 or 4 apples for my fruit salad. There’s no point buying Mangos if I don’t want then in my fruit salad.
Related article: Three steps to building a portfolio
So there you have some of my parallels between health and money. Sometimes taking financial concepts and relating them to other areas of our lives helps us to appreciate learning better. Chances are, everything I talked about you know already. If that’s the case, why is it that so many people are living paycheque to paycheque and victims of financial stress. Sometimes we need to be reminded of the most basic concepts to improve our financial health.