Assessing Your Financial Fitness

Financial fitness is possible.   Everyone has the opportunity to be financial fit, the question is how to do it.  It’s not as hard as some make it out to be.  To be financial fit, you need to focus on a three key areas.

#1 – Your Insurances

You should review and shop your insurances once a year.   Insurance companies change insurance rates and insurance coverages quite often; unless you stay up to date, you will not be aware of those changes.

Insurance Guideline:

  • Discounts, are you receiving all of the discounts available; which may include, home/care, long-term customer, good student, anti-theft, airbag, multi-car, alarms.
  • Clean record, are you getting credit for having a spotless driving record.
  • Shop your insurance if you are getting a new car; insurance companies rate features of your car differently.
  • Shop if you are adding a youthful driver.  The way a teenage driver is rated depends upon the insurance company; some rate teenagers higher, some don’t.

#2 – Your Debt

To fight debt you need to know where your money is going.  Tracking your expenses with a budget is the best way to do this.  Following a budget sounds so old-fashioned but it is the simplest way to follow your money.

Debt Guideline:

  • financial fitnessYour total debt should be less than 35% of your income.
  • Your housing debt should be less than 25% of your income.

If you find that you have high credit card debt, be sure to pay down the credit cards with the highest interest first.   You may also consider consolidating your debt.   Your credit score will suffer if you continue to carry high credit card balances so if you need credit repair help, get it!

#3 – Your Credit Scores

Your credit scores are one of the most important factors in getting financially fit.  If you have a low credit score you need to work on improving credit scores.  With a low credit score, you pay more for goods and services.   Creditors, landlords, loan companies, insurance companies and utility companies will charge you more when you have a low credit score.

Credit Score Guideline:

  • 850 is a perfect credit score.
  • 750 to 850 is a good credit score
  • 300 to 750 is a poor credit score.

To know if you need to improve credit scores, you need to monitor your credit report.  The best way to monitor your credit report is to order your free credit score once a year.   Each of the 3 national credit reporting agencies are required to provide you a free credit score on an annual basis.