PERSONAL FINANCIAL FITNESS

Most of us overdid it on Thanksgiving. For me, it was the extra stuffing and the second piece of pumpkin pie that put me on the other side of my fighting weight.

As a result, I’m paying closer attention to being healthy. I’m paying attention to what I eat and I’m paying attention to getting the right amount of exercise. This motivation got me thinking about personal financial fitness.

There are so many things that people can do to become more personally financially fit. There’s always room to improve your finances by just paying more attention to where you’re spending and what you’re spending it on. Just as we pay attention to our physical fitness — making sure we eat right and exercise, we also need to pay attention to our personal financial fitness. There are 5 ways that you can get more personally financially fit. They are:

1) Saving More:
One of the best places for you to save more is with a Roth IRA. Roths are just awesome savings tools because you can actually take out your contributions tax-free. Roths also have a catch-up provision that make them a great way for later starters to make larger contributions. Each individual and a spouse can contribute $4,000 a year. If you are over 50,
that number is $4,500.

2) Spending Less:
You know what’s amazing? People will actually clip coupons, rent movies instead of going to the theater, only buy tomatoes when they’re on sale, but these same people will buy big load, under-performing mutual funds when they can get the same kind of funds for much less by switching to ETFs.

Probably the most effortless step you can take to achieve better personal financial fitness is to get rid of your mutual funds and replace them with ETFs, which are 70% cheaper to buy
than mutual funds without those expensive management fees. It’s kind of like getting a big, fat, juicy filet mignon for the cost of a Big Mac. Check out ETFs at http://www.amex.com. There they have a list of all available ETFs by sector, by industry, by country, every imaginable breakdown to give you the full story on ETFs.

3) Monitor Your Investments:
When you purchase an ETF,you are committing your hard-earned money to that investment. You simply have to stay on top of those investments and always have a plan. At Fabian, I never, ever purchase an ETF without knowing exactly under what circumstances I would sell that fund. You simply have to. That’s how you can avoid losses.

4) Have the Right Amount of Insurance — No More, No
Less:
Having the right amount of insurance is really crucial to personal financial fitness. You need health insurance so you will not suffer a catastrophic loss from an illness or injury. Did you know that most bankruptcies are the result of medical bills? It’s true. Make sure you have the proper coverage.

If you have a family and/or a mortgage, you need life insurance. How much? That depends on your circumstances. How many children do you have? How big is your mortgage? A general rule of thumb is 7-10 times your income, but if you have a big family or a big mortgage, that number could be a bit higher.

The crucial issue regarding life insurance is to make sure you buy it rather than get sold a policy by someone who’s making a commission. The insurance industry is evolving daily and you can now buy insurance direct from the source through quality companies. This is the best way to buy life insurance because you will pay no commissions.

5) Have a Safe Mortgage:
People are going to be burned by risky mortgages—mark my words! So many people jumped in for interest only or option ARM mortgages because they thought they could save a few hundred dollars a month. That sounds like a good plan for personal financial fitness, doesn’t it? Nope. Interest rates are climbing and a lot of those people are getting nailed with increases in their mortgages that are making the 30-year fixed rates they passed up a year ago look like the bargain of the century.

Unfortunately, it’s too late for them and for a lot of other people. Mortgage defaults are up over 18% in just one month.

The handwriting is on the wall, folks. I urge you to refinance adjustable rate mortgages, interest-only, option ARMS, and negative amortization loans right away. It’s going to get really tough as this the Fed engine just keeps rolling through town with higher interest rates. Anyone who doesn’t prepare their mortgages runs the risk of getting burned, and badly.

If you’d like to talk to an expert about your mortgage, please give Josh Lewis, "The Homebuying Coach," a call. He’ll give you the perfect advice for how you should handle your individual situation. You can reach him at (800) 218-9217 or via email at jlewis@stearns.com.