I recently started on a 21-day fitness/diet plan to tone up after COVID.  In general, people seemed to react in one of two ways to the pandemic.  One group used this time to diet and exercise and get into shape.  The other group (ahem, me included) may have gained weight from indulging in comfort foods, an extra glass of wine and binge-watching Netflix.  In a recent survey by the American Psychological Association, 61% of respondents said that they had an undesired weight change since the epidemic started – with the average gain of 29 lbs.!  Stress was clearly the culprit.  Now that life is slowly returning to a state of normalcy people are beginning to deal with these issues and planning to lose the weight.

How does this relate to financial health?  Well, in my fitness program there are basically 3 components.  Activity level, calorie counting and macro nutrition.  Let’s see how each of these compares to steps that we take to achieve optimal financial health.

Activity Level: Setting goals and monitoring progress

Whether you wear a Fitbit, a Whoop or an Apple watch the key is that you are setting activity goals for yourself and monitoring your progress.  10,000 steps/day has become a mantra and devotees work hard to reach these targets.  This motivation works because you set a goal and track your activity.  In the world of personal finance, the equivalent is setting financial goals for yourself, such as saving a certain amount for your emergency funding, retirement or college education and reviewing your progress on a regular basis.  Whereas activity levels are monitored daily, financial goals are longer term in nature.  These are measured in months and years.  However, tracking your progress is just as important to your ultimate success.  We recommend reviewing your goals at least annually to make sure that you are on course.  Having a financial coach can help this process.

Calorie Count: Budgeting and accountability

The part that most people hate about dieting is counting calories.  Everything that you eat needs to be tracked to get an accurate picture of your total daily intake.  The only way that you can lose weight is by burning more calories than you eat.  When you eat more calories than you burn, you gain weight.  In financial planning this compares to budgeting.  Those who spend more than they make (deficit spending) will end up with increasing debts and an inability to save for the future.  On the other hand, those you consistently spend less than they make and can save will find that they can achieve their long-term goals.  Just like dieting has apps to deal with calorie counting, there are excellent apps for personal budgeting (PocketGuard, Mint, YNAB and Goodbudget to name a few).  Need help getting a handle on where the money is going?  A CERTIFIED FINANCIAL PLANNER™ can come help you get started.

Macro Nutrition: Asset Allocation

Macronutrients are simply the 3 main nutrient groups: fats, carbohydrates, and proteins.  In a diet that counts macros, there are specific ratios of each of these based on your current weight, age, goals, and activity level.  For example, if you are trying to stay lean and add muscle it might be 30% fat, 30% carbohydrate and 40% protein.  It wouldn’t be healthy to have all of your calories in fat!  In financial planning this is equivalent to setting the recommended asset allocation for a client.  In broad terms, the categories for asset allocation are stocks (equities), bonds (fixed income) and cash.  Let us say that you are 60 years old, still working and have a moderate risk tolerance.  With retirement 6+ years away, your asset allocation might be 60% stock, 37% bonds and 3% cash.  This is a basic illustration and actual categories would be more granular; for example, stocks would be further divided into US large cap, mid cap, small cap, and international.  The customization of the asset allocation (like the macros) is tailored to the individual client and their goals. The correct asset allocation is a critical factor in achieving one’s financial goals.  Although many people have a basic understanding of asset allocation, surprisingly few know what their asset allocation is at any point in time.

Just like a coach who helps you achieve your physical health goals, we as CERTIFIED FINANCIAL PLANNERS™ can assist you in reaching your financial goals.  Call us to learn more!