Why is Financial Fitness Important in Life

Just as neglecting your physical fitness has consequences, so does neglecting your financial well-being. Financial fitness is important in life because it helps you live your life worry-free. When you are financially fit, you can confidently weather emergencies without sacrificing your investments or goals. This article outlines why financial fitness is important in life and how you can become financially fit. 

• Financial fitness is essential to attain fiscal independence and prepare for the future.
• Making life decisions and achieving life goals becomes easier if you are financially fit.
• You can become financially fit by setting a budget, identifying goals, planning for emergencies, and paying off debts.

When it comes to your finances, the importance of financial fitness cannot be overstated. Here’s a list of reasons why you should strive to be financially fit at all times:

Attaining financial independence

Financial independence is the act of being in control of your finances. Financial fitness is important to achieve this goal of independence. You can exercise command over income, expenses, and investments only when you are financially fit. Therefore, to avoid relying on others and achieve the goal of fiscal independence, you first need to master financial fitness.

Stay prepared for the future

No one knows what the future holds and financial fitness helps you prepare for anything ahead. Financial fitness is all about allocating funds not just for the present but also for the future. By planning for the unknown, you can save ample money to cover your rainy-day expenses. This helps you avoid financial constraints when dealing with unforeseen emergencies.

Achieve life-long goals

If you’re wondering why financial fitness is important, the simplest answer is that it’s vital for achieving your goals. We all have long-term goals like settling down in a spacious house and enjoying a comfortable retirement. Financial fitness helps you create a roadmap to these goals, plan investments, and manage them to finally attain your objectives.

Make informed life decisions

Financial fitness is all about having a proper handle on your finances. The act of prudent money management helps you make better decisions in your personal life as well. For instance, if you know you need to save money for retirement, you’ll be less likely to splurge on discretionary expenses. If you’re planning a vacation trip, you may want to cut down on the trip’s overall costs by opting for cheaper accommodation and transport to save the extra funds for your retirement goal. In simple terms, financial fitness is important for prudent budgeting and minimising overspending.  

Now that you know why financial fitness is important, you must be wondering about how to attain it. Achieving the goal of financial fitness is relatively simple, once you master a few basics. Here’s a list of ways you can achieve financial fitness:

Know your current financial situation and create a budget

Assess your current financial situation by gathering information about your monthly income and expenses like rent, insurance premiums, utility bills, and EMIs. Understanding your current financial standing will help you review not just your earnings and expenses, but also visualise your debt burden. Create a budget with categorised expenses to locate overspending areas and limit such spends. Review how much you have left to save and if you can indeed increase this amount with expense cutbacks.

Set financial goals

Once you realise the importance of financial fitness, you need to set clear and definite financial goals. Setting goals will help you focus on priorities and foster good saving habits. Be it a short-term goal like buying a two-wheeler or a long-term one like retirement, setting specific, time-bound goals will help set timelines and estimate target amounts to invest accordingly. In simple words, setting goals will help you determine the next steps on your personal finance journey. If you are looking for a safe investment option, you can consider fixed deposit. They offer guaranteed returns and a fixed interest rate throughout your investment tenure.

Plan for emergencies

As mentioned earlier, financial fitness is important to ensure preparedness for the future. This means you must prioritise emergency planning to keep your financial health well-protected in the face of unexpected crises. Creating an emergency fund that holds at least 6-9 months’ worth of your living expenses is the first step. Getting insured with both health and life coverage is the next step on the list of plans for emergencies. This three-pronged approach will ensure that you have a comprehensive safety net to fall back on.  

Pay off debts

Attaining financial fitness means becoming debt-free as early as possible. You should review your budget and see if it is possible to repay debts faster. Ideally, you should prioritise high-interest debt like credit cards and personal loans that come with high APRs, which can compromise your financial fitness in the long run. It’s best to devise a repayment strategy based on the suggested avalanche repayment method or on the snowball method, where you tackle small debts first.

Review your progress

Apart from planning for emergencies and paying off debts, you must also track your progress towards your goals. Monitoring your progress towards goals helps you understand if chances in your strategy are required. For instance, reviewing your progress helps you understand if you need to save more for a particular goal to achieve it within the given timeframe.

Monitor your credit score

Another crucial step in attaining financial fitness is regularly monitoring your credit score. While it may seem futile today, your credit score plays a vital role in securing credit on favourable terms when you require hefty cash infusions for goals like buying a home. Reviewing your credit score frequently keeps you aware of your standing. If you have a low credit score, you can also implement steps to improve it.

Financial fitness is important for getting control of our finances. By attaining the goal of financial fitness, you can enjoy fiscal independence, achieve your life goals, and stay prepared for the future. In short, financial fitness paves the way for a stable and happy life. You can attain the security of financial fitness by taking stock of your current finances, budgeting, planning for emergencies, setting goals, repaying debt, monitoring your progress, and reviewing your credit score. Remaining financially fit is crucial to have a happy life without any fiscal compromises. You can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 8.85% p.a.