Few people know what financial fitness is and even fewer know how to test their financial fitness.

You are about to find out the simple way that it’s done.

Before I get into the test, I wanted to share with you the common misconceptions about what makes someone financially fit so that you don’t fall for any of these traps.

Let’s start with what is NOT financial fitness…

First, financial fitness is not determined by any one number. It’s definitely not defined by your income. A mid to high earner can be more financially unfit than a lower income earner. It’s all about what you do with the money that you bring in.

But financial fitness is not determined solely by how much you spend, though that’s definitely an important aspect of financial fitness; you have to spend less than you make.

Perhaps surprisingly, a lot of savings doesn’t mean that someone is financially fit either. Hoarding money isn’t the name of the financial fitness game. To me, it’s about saving AND spending in alignment with your values, not ego. Saving that’s driven by so much fear that you can’t spend any money is not healthy.

Finally, financial fitness is not a feeling; you’re not financially fit just because you feel that you are. However, feeling good about your finances is a requirement for financial fitness. You need to be satisfied with how you’re managing your money. Feelings matter, they’re just not everything.

Financial fitness is…

Financial fitness is assessed monthly. It’s important to test yourself on a monthly basis because that makes any necessary adjustments easier to handle. If you catch overspending in any category after one month, it’s easier to correct that in the upcoming month. If you’ve overspent for several months before catching it, it’s harder to correct because you may need to make drastic cuts to stay on budget by the end of the year. Doing anything drastic with money is a recipe for disaster. Financial moves are best when they’re mundane. Having to make drastic cuts is demoralizing and stressful – completely opposite to what I want you to feel about your money.

Along the same lines, financial fitness is assessed at the beginning of a month, about the previous month. Make yourself a promise that you’ll test your financial fitness within the first week of a new month. Or you can do what I do and figure it out on the first day of the new month. The reason it’s so important is that if you catch any over or under-spending early enough, you have enough time left in the month to reduce or increase your spending in the affected categories. That way, you can make gentle adjustments to your spending, the way you would gently correct your steering wheel if you felt the bumps in the road indicating that you’re at the edge of your lane.

With that being said, you’re finally ready for the simple 5 question financially fit test. Watch me break down each question below. I’m curious about your thoughts on my test. Please reply to this email or in the comments on YouTube.

Transcript:
So how do you objectively know if you are actually financially fit? I’ve got a fun five question test that you’ll take every month to know definitively if you are financially fit. Ask yourself these five questions at the beginning of each month, about last month. You’ll need to answer yes to all five of them to claim victory.

All right, question one. Do I know how much money came in, like actually landed in your account? Not what you hoped, wished, expected or estimated, but like the real number that you brought in last month.

Question two: Do you know exactly how much money went out last month? So that’s adding up all the money you spent, all the different spending ways that you’ve got, credit cards, debit cards, apps, whatever.

Question three: Do you know that more money came in than went out? Let’s say yay for positive cash flow. Or think of it like were you profitable? The only caveat to this one is that if money went out to things like savings accounts or investments accounts, you’d like break even technically. But what this question is really testing is did you bring in more money than you spent in expenses?

Question four, my favorite question and the world’s most rhetorical question that as of today is no longer rhetorical. Here it is. Where did all my money go? How many times have you asked yourself or even said in exasperation, “Where the F is all my money going?” It’s a great question, but hardly anyone answers it. Well, now you are one of them. You’ll ask yourself, do I know where all my money went? And you’ll say yes, because you’ll know exactly how much money went towards each of your spending categories like groceries and gifts, wardrobe, and even home supplies. If you are not sure what categories of spending belong in your budget, make sure to check out my video on what budget categories you need.

And finally, question five: Am I satisfied with where my money went? This isn’t just asking how you feel about where your money went. You’ll actually compare your spending to your budget or spending plan if you hate the word budget. If you’ve created a budget the way I recommend, which is to create a values based budget, then you’ll actually feel satisfaction when you compare your spending to your budget and see that they’re aligned.

So again, you got to answer yes enthusiastically to all five questions to know that you are financially fit. If you’ve answered affirmatively to all five, then congrats. You’ve got my respect because I know that most people cannot pass this simple test. I know that it’s tough because no one taught us this stuff. We definitely should have learned it in school, but oh, well, we’re here now. Right?

Hit like and subscribe, and be sure to enter your name and your best email to get a free resource from me that helps you answer these very questions. I’ll see you in the next video.