Steps to Financial Health

| MOSAIC October 2013

Having lots of muscles does not necessarily make you physically healthy.  In the same way, having lots of money does not make your finances healthy. Nor does having very little money make you financially unhealthy. Your mind is created to control your muscles. Your muscles shouldn’t control your mind. Health in finances – like health in body – comes from looking after what you’ve been given, and not letting the lack of money or the abundance control you.

And just as in physical health, there are things you can do now to help make you financially fit. Financial health involves making choices.  Deciding to live differently. It may mean giving up what makes us unhealthy – like debt and overconsumption – and choosing to live free from debt and start being grateful for what you have.  Because from gratitude, generosity flows. And that is taking hold of life that is truly life (1 Tim 6:19).

So what are these steps to financial health?  Put down those credit cards and follow me to the financial fitness centre…

Step 1:  Know where you are (Go to the Mirror)

You need to know where you are starting from. Do you owe more than you own? Are you living above or below what you make – and by how much.

Step 2:  Know where it’s going (Go to the Scales)

Health can slip away when we are not paying attention. Many have no idea what is consuming their money every month. And just like counting calories, you need to start counting where every penny is going.  It’s the little things we spend that nibble away at our financial health.  Start recording every cash, debt and credit card transaction.  Keep this up for a whole month. This is a critical step in understanding what needs to change.

Step 3:  Initial Emergency Savings (Go to the Stair Climber)

Now here is where most people want to dive into an aggressive training program by diving into balancing the budget.  Before you can do that, however, you must start an initial savings plan of one month’s expenses in order to break the cycle of always turning to debt.

Step 4:  Snowball your Debt Repayment Plan (Stick to the Weight Loss Plan)

No pain, no gain. In order to break free from debt you must first commit to no new debt. Then fix all your minimum debt payments. Once the smallest debt is paid shift the payment to the next smallest debt on the list. Keep rolling these payments onto the next debt until all the debt is paid.  This will take some time – but no where near as long as if you just stuck to the minimum payments.

Step 5: Balance the Budget (Strength Training)

Now it is heavy lifting time. Balancing the budget.  For some, this might mean getting more income.  For most, it means cutting out all the extras that are consuming money you don’t have. Make sure you are also setting aside some money for your initial emergency savings and giving.  Savings so that you can break free from debt.  Giving so that you can break the hold debt has on your heart.

Step 6:  Fully Fund your Emergency Savings (Endurance Training)

Once your consumer debt is completely paid off, take this monthly amount and add it to your emergency savings until it is fully funded (3 months expenses).  At this point you are considered ‘Financially Stable’.

Step 7:  Financially Fit (Welcome to Health!)

Once your emergency savings is fully funded, you can start using that money to accelerate your mortgage and long term savings.  Continue to live free from consumer debt and live simply below your means. Choose to be content, and grateful. Choose to live generously.

If you are interested in learning more about becoming debt free and financially fit, we have resources online that can help – Spending Plans (Budget), Net Equity Forms, Debt Calculators, and more.  You can find them under Stewardship Resources under the Resources menu.

If you are interested in hosting a Debt Free and Financially Fit seminar at your church – or becoming a coach to help others get financially fit – give me a call!  I love helping people find freedom from debt and discovering the joy that comes from giving from a blessed heart.