How "fit" are you?

I was sitting here, drinking my coffee and looking over our family monthly budget when I realized something: there is so much more to being "fit" than just the physical. The health and beauty sector is a billion dollar industry focused on the outward appearance and health of the consumer. What concerns me is that there are so many other aspects that impact your level of fitness, including your financial state. When I was in school, we were taught how to balance a cheque book and how to "arrange" our finances on $1000/month -although, the expenses in the examples were far from realistic. I remember my teacher discussing the important difference of "wants" and "needs," and how credit cards should be paid every month. However important these lessons were, I still feel they did not properly prepare me for the weight of being financially responsible. It took me a long time to understand how to be financially fit, and like every other aspect of my "fit life" it takes determination, consistency, and sticking to the plan. How about you? Are you one of those people? Are you financially fit?

I moved to Alberta with nothing more than a box of dishes, some clothes, and a little red Honda Civic to my name. I was moving on a whim to be closer to my then-long-distance boyfriend. A year later we were in our early twenties, engaged, and had recently found out we were expecting. Well, let me tell you that this little tidbit of news quickly lit a fire under our asses, urging us to become grown ups. We decided that we wanted to stop renting and buy a house for our little one to grow up in; but in order to do that we needed to review our finances and really knuckle down on our budgets. Looking back now, I still think that we had the right idea. There were, however, many nights when we laid awake at hoping we could make it to the next pay day. We were both still learning the struggles of paying off debt, purchasing with cash, building credit, and trying to live a lifestyle that kept up with our friends, and we threw "raising children" right in to that mix! A few years and many bottles of wine later, we have become fairly self aware of our spending and money habits. I'd say, on a scale of 1 to 10, we are an 8.5 for being financially fit, only because we haven't hit our first million, yet. Yes, being an accountan helps, but I believe the key has been our willingness to admit when we don't know something and choosing actively search for the answer. It's not hard to get there, it just takes a little understanding, some effort, and a heck of a lot of determination (also known as self discipline). With that being said, here are some tips -from an accountant, no less- that may help you get started on becoming financially fit

1. Know what it means to "Have Debt"

Believe it or not, I have actually heard the words "Once I get my line of credit, I will use it to pay off my credit cards so I can be debt free!" *forehead slap* I have, also, heard "I don't have debt. I just have my car loan" *double forehead slap* First off, who is teaching you this shit?! Second, debt is debt. You owe someone? That's debt. Do you have a loan? That's debt! Paying off debt with debt, like paying your credit cards off with a line of credit, still means you have debt. Plain and simple. Once you understand what debt is and can identify your debt, make a list of all the types of debt you have, what the monthly payments are, the interest rates on each one, and when you are expected to make your payments. This will help you when you are creating your monthly budget.

2. Know how much you make

Just because my salary may be $50,000 per year doesn't mean that is my "take home". What comes out of your pay check? EI? CPP? Taxes? Life insurance? Health insurance? A monthly donation to a charity? Do you have an RRSP contribution? Is that contribution deducted before or after you pay employment income tax? You need these answers to determine just what your real monthly income is. Finding out how much you bring in helps determine how much you have left over, after mandatory expenses, to put aside in savings, pay down your debt, and then maybe spend with you friends on a Friday night.

3. Know your NEEDS

"All you need is love" is total bull shit. Every human has the right to shelter, food, and clean drinking water. You may also want to clothe your bare ass. Knowing your needs determines your MANDATORY expenses. Most days it seems there is a blurred line between "wants" and "needs." You NEED a roof over your head. You DON'T need a three bedroom apartment with designated parking space, granite counter tops, and a patio, situated downtown when you live alone with your two cats. You NEED food on the table. You DON'T need to eat at a restaurant for every meal. Make a list of your expenses -think rent, groceries, gas, insurance, car payment, cell phone, electricity, and water. These are your MUST PAY expenses. Deduct them from your real monthly income, and the remainer is what you have left to invest or "play with"

4. Give yourself an allowance

I do my chores. I clean up after myself, make my own bed, do my laundry, and act as a decent human being 98% of the time. Because of this, I earned my gold star on the fridge and my weekly allowance! In all honesty, my allowance is probably what keeps me in check the majority of the time. I pull out cash once every two weeks and "pay" myself an allowance. This is my "play" money. It is what I use when I want to buy coffee on-the-go, go out for dinner and drinks, or go out shopping. My husband and I determined a long time ago what we would pay ourselves and try to follow it to the letter. Having something tangible, that we can physically count has helped us manage our spending and curbed our habits significantly. It is too easy to spend when all we see is a plastic card. Cold hard cash means you see what you are spending, and may think before you hand it over. We do this, and then keep our plastic at home, only to be brought out when the kids need something or we go get groceries. Out of sight, out of mind.

5. Make a plan to pay off that debt

It doesn't have to be a crazy plan with pie charts and graphs. Your plan may just mean that you mark in your calendar when bills are due and pay those first before paying yourself. We chose to write the starting number of our debt in dry-erase on our bathroom mirror. Underneath this number, I wrote out benchmarks for where we wanted to be at the end of the month for the next six months. Every payment we made, we crossed off one of these benchmarks, but didn't erase them. Seeing where we had come from and where the next benchmark was pushed us to save and make those payments. We were excited to make the next benchmark, and were reminded of it every time we brushed our teeth or washed our hands. It was a simple plan, but we paid down over 5 figures in debt within 6 months! Talk about feeling accomplished! Remember: every little penny counts.

6. Review your plan regularly, and be open to change

It's ok to change your plan. Try it out, if it doesn't work, figure out why and alter it. What matters is that you find out what DOES work, and stick to it. Financnes change. Maybe you take on a new loan, or you find out you have something new to save for (ie. a tropical family wedding you can't miss; a baby!) Life is full of surprises and fun events, you don't want it all to pass you by simply because you weren't financially prepared. We annually plan once a year, and then revise that plan regularly. We are coming up on the year end, and are starting to make decisions such as: what type of classes will the kids do? Am I going to be doing any competitions in 2016 (answer: yes)? Will we be taking any family trips? Where, and how are we getting there? What is our reserve for any home disasters? What fun things do we want to be able to do, as a couple? All these questions can be tentatively answered to create our 2016 budget. By being prepared, we aren't thrown by life's abiliity to be an ass-hole.

I'm not perfect. Neither is my husband. We have our expensive indulgences. I don't get my nails done, but my hair can easily cost me upwards of $200! I believe in giving my children the opportunity to discover new activities, and things like dance, swimming, and gymnastics can get expensive. My husband really likes video games. Show suits, spray tans, and fitness associations cost a lot! We choose not to be cheap, but we do act frugal. It has helped us stick to our budget, do some travelling, and still save for a new house. These 6 steps have helped us become financially responsible, and they are great stepping stones to gaining financial control.