Too often I see families buried in a mountain of debt because they needed the same material things their friends have but had no source of money to actually pay for it.
By AARON KATSMANMoney Shekels bills 521(photo credit: Courtesy)
With the Jerusalem Marathon a month away, the amount of runners training for one of the races is impressive. From beginners hoping to finish their first 10-kilometer race, to seasoned runners preparing for their first full marathon, the scene in the capital is certainly inspirational.While the runners have their own motivational reasons for wanting to put their bodies through the grueling endurance race, many novice runners have taken to the sport as a way to get in shape and shed some unwanted pounds.Fiscal fitness Believe it or not, there is much in common between weight loss, physical fitness and financial well-being.Unfortunately people tend to bite off more than they can chew (I couldn’t resist!). The key to successfully losing weight is discipline. Cutting back on what you eat and adding exercise to your lifestyle will help you shed those unwanted pounds.It’s when we say, “I want to lose 20 pounds,” without a plan how to do it, that we tend to get in trouble. Getting your finances in order, or becoming fiscally fit, is the same.If you create unrealistic financial goals, you’ll likely become frustrated and resort to your old ways.Here are some tips to help get you on the path to fiscal fitness:Start saving whatever you can While this may seem obvious, the need to institute a disciplined savings plan is paramount to getting your finances on the right track. I can’t tell you how often I hear, “I have my whole life to save; I don’t need to start now. I’d rather buy a new car and in a few years I’ll start.”Each year that passes with no investment will effect your retirement. Assuming you have 30 to 40 years until retirement, every year you forgo saving or investing money today will subtract one to five years from your retirement.Along the same lines, I often hear people in their 50s, when speaking about retirement planning, say, “I don’t worry about retirement because I’ll just keep working.” Sounds good – except what happens if you can’t keep working.I recently met a man in his early 50s who has worked as a house painter his whole life. He told me it’s getting hard for him to paint for a full day because all the hard work has taken a toll on his body. Thankfully for him, he started saving at a young age.Live within your means In today’s consumer-driven society, the temptation to spend money is overwhelming. How many of us “need” to have the latest product from Apple? Or have to fly to Europe for a winter skiing trip because our neighbors did so and our children will be envious if we don’t go? There is nothing wrong with spending money on gadgets or trips – as long as you actually have the money to spend.Too often I see families buried in a mountain of debt because they needed the same material things their friends have but had no source of money to actually pay for it.A credit card, post-dated check or multiple payments are no substitute for actual money. All you do by choosing this path is to delay the inevitable. At some point the music stops, and if you have no money to pay for your purchases, you go into debt. By keeping track of all income sources and then figuring out a budget based on that income, you will successfully be able to live within your means.Have an emergency fund Your fridge just broke. Do you have any money to fix it? According to a recent study by the National Foundation for Credit Counseling, the answer is no! The study said almost 65 percent of Americans don’t have $1,000 available to handle an emergency expense. While I have not seen any Israeli studies on this topic, I assume the numbers would be similar.Sometimes bad things happen. You may need to change a muffler on your car or fix a chipped tooth, or you may be out of work. By creating an emergency fund you will be able to handle surprise expenses. Many financial planners recommend six months of salary to be in an emergency fund. I personally think that for most people that may be a daunting task, so I recommend two to three months instead.The money can be kept in a short-term deposit or something similar. The goal is not to try and get rich on this money; rather, it’s to have it liquid and available at a moment’s notice in case you need to draw upon it.By taking these easy steps you can get your finances on solid footing and become fiscally fit.aaron@lighthousecapital.co.il Aaron Katsman is a licensed financial adviser in Israel and the United States who helps people with US investment accounts.
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