Summary:
- Becoming financially healthy, similar to becoming physically healthy, is not a one-size-fits all approach.
- To be financially healthy, start with creating a budget specifically for your needs.
- Determine how you can drive down debt to help improve your credit score.
Whether you’re scrolling through Instagram or wandering the aisles at your local grocery store, there’s one word that seems to pop up on food labels and recipe captions: KETO. It seems like Keto has become synonymous with being healthy and physically fit. But in addition to being physically healthy, it’s also important to be financially healthy. Being financially fit means that you have the money you need, when you need it, and the means to access credit lines as needed, usually with a high credit score.
It may seem odd that fad diets and credit scores can have quite a bit in common, but here are some ways they are similar.
Being both physically fit and financially fit are not one-size-fits-all processes.
Just like some diets and types of exercises aren’t for everyone, some tips on finance management and credit score improvement may not be for everyone as well.
For example, the keto diet is said to be an effective way to shed some pounds. But even within the Keto diet, there are different types of Keto diets, and individuals have to determine which is best for them and their lifestyle. Or, they may decide that the Keto diet isn’t right for them at all.
Managing your finances and your credit score can be the same way. Your financial situation can depend on countless factors, including employment, monthly expenses, cashflow, savings, accumulated debt, credit score, and more. You’d be hard-pressed to find someone with the exact same numbers as you! While you can follow certain best practices when it comes to budgeting or making on-time payments, each person’s approach will be different.
Bottom line: what’s best for your health and your finances may not be what’s best for someone else.
Cutting carbs and calories is like cutting spending.
To create a health plan that is right for you, you first need to identify your goals, and then determine the best way to achieve those goals. What type of diet makes sense? Is it one of the Keto diets or another one? What type of exercise do you like to do and how many days per week can you dedicate to it? (Speaking of, we spoke with a reality TV competitor to share some budget-friendly exercises.)
Your finances can be approached the same way. Create a budget for your personal finances that works specifically for you. We have several resources discussing budgets and offering calculators. Click here for “do’s and don’ts of budgeting during a crisis and here for a budget calculator to get started. The calculator will give you a baseline of how much you should spend on needs (50%), wants (30%), and savings for future expenses (20%).
When losing means you gain.
If your goal is to lose weight, you typically need to track and reduce the number of calories to do so. Similarly, reducing credit card debt is critical to financial health and in improving your credit score. Did you know that approximately 60 percent of Americans are carrying debt? Some may be able to pay off the debt all at once. If that’s not possible to do, contact your lenders, explain your situation and see what relief options they can provide. If your lenders cannot provide the help you need, perhaps a debt management plan will work better for you. This plan can consolidate your debt and tailor monthly payments that you can handle. In addition, you want to make sure your balance on your credit card is under 30 percent since any amount over 30 percent of your credit line can have a negative impact on your credit score.
Be disciplined when it comes to your diet and working on improving your credit score.
Whether you are looking to move numbers on a scale or on your credit score, reaching your goal requires a great deal of discipline and focus.
When it comes to your finances, being disciplined means paying your credit card debt on time and in full, keeping your balance or credit card utilization under 30 percent, holding a solid credit history (don’t close old accounts since this can show a longer credit history), maintaining a healthy mix of credit types, such as a student loan, mortgage and auto loan, and being conservative in opening new cards.
It’s okay to treat yourself every once in a while.
Don’t deprive yourself on a diet or in your finances. Indulging in a scoop of mint chocolate chip ice cream every once in a while shouldn’t derail your progress, and neither should spending a small amount of money on something that you want.
It’s important to create a healthy balance in your life between smart healthy spending and entertainment expenses.
Check your progress and check your credit score.
Whether your Keto goal is to move numbers on a scale, lower your blood pressure, or another health-related milestone, it’s important to measure your progress. Similarly, it’s important to monitor your credit score regularly. You can check it for free on Credit Sesame. We’ll also provide you with some personalized recommendations for how to improve it, because we recognize that everyone’s goals and journey are one-of-a-kind.
This article is for informational purposes only and should not be relied on as financial advice.
