3 ways managing your money is like getting in shape
Blood, sweat, and tears. Okay, maybe not the first part, but for anyone who's made it a goal to get in shape, these words can often come into play when you're kicking off a new exercise regimen.
But what about if you've made it your goal to finally get your finances in shape?
Well, it turns out that becoming physically and financially fit are actually complementary goals — at least according to a study out of Washington University.
Researchers found that people who adequately planned for their financial futures by contributing to a 401(k) plan were more likely to take care of themselves physically than those who didn't — and they were healthier overall, to boot.
In making sound decisions when it came to their money and their body, people showed that they were willing and dedicated to making a long-term investment … in themselves.
Of course, whether you're endeavoring to shed 20 pounds or save $20,000 for a down payment on a home, you can't reach healthy results without some serious elbow grease — and the right mindset.
So read on for some good strategies you can consider for strengthening both your fitness and financial game — along with the skinny on the one ingredient that'll help keep you on the road to success.
Fitness-financial connection #1: The psychology behind overeating and overspending
Think of the initial satisfaction — as well as the subsequent guilt — you may feel following a weekend of binging on junk food and ordering one too many drinks at Sunday brunch. Now think of another time you've felt the same way.
Was it, by chance, your last shopping spree?
Whether you're overeating or overspending, the gratification that comes from indulging in something that's bad for you can happen in a flash — and the effects are usually just as fleeting, which is why many people fall into a pattern of repeating the behavior, packing on pounds and debt in the process.
So if, on an intellectual level, we know that the behavior isn't good for us, why do we continue to be reckless with our health and finances? The answer is twofold, with your head and your heart both playing a role.
From a scientific standpoint, overeating and overspending urges tend to stem from the same culprit: stress.
According to a study from Harvard Medical School, stress hormones push us to crave comfort foods — typically items high in sugar and fat — that actually send signals to the brain to shut down those problematic hormones. Likewise, spending money is a common activity that some people may use to deal with — or mask — anxiety.
As Hersh Shefrin, a behavioral finance pioneer and professor at Santa Clara University's Leavey School of Business, explains it, our brains are actually fighting impulses to overeat or overspend all of the time — but introducing stress ups the ante.
There's a psychological immune system to help us deal with these cravings and urges, he says. But when we are under stress, our emotional immune system is affected, and our ability to exercise self-control can be impaired.
Brande R. Plotnick, 41, an aspiring entrepreneur based in Philadelphia, is well aware of the emotional reasons that can encourage people to overdo it. "I was in a cycle where I would overspend on my credit card, feel guilty about it, and then make huge payments each month, which left me broke," she says. "Then I'd need the credit card for essentials, and it would start all over again."
Plotnick says that her behavior stemmed from a need to keep up appearances. "I was comparing myself to other people and what I thought they had," she says. "Fortunately, I realized that just because they owned things I wanted didn't mean they could afford those things."
Once she recognized that her overspending habits were standing in the way of her financial security — as well as her dream of starting her own cooking brand — Plotnick resolved to revamp her finances, a task she tackled "with the determination of a bride trying to fit into her wedding gown on the big day."
Her first plan of attack was to adopt a visual budgeting system, requiring her to stuff a set amount of cash for such priority expenses as food and gas into envelopes at the start of each month. Once the money for each item was gone, she had to stop spending — regardless of whether it was the middle of the month or the end.
According to Hank Lobel, a CFP® with LearnVest Planning Services, it's this part of financial fitness — budgeting — that can be hardest to start and maintain, just like the dieting component of getting physically fit is often the more difficult obstacle to hurdle.
"I think people like to focus on exercise — getting stronger and leaner — instead of their diets. Similarly, they'll focus on growing their bank accounts, but they don't want to pay attention to budgeting," Lobel says. "It's like a person who goes to the gym and presses 300 pounds, and then goes to McDonald's."
And so just like it's difficult to see lasting physical results unless you combine a fitness plan and healthy diet, you may not see financial results without adjusting your spending and savings habits.
In Plotnick's case, diligently following her revamped budgeting system allowed her to save enough to significantly hack away at the six-figure student loan debt that had been keeping her up at night — in just over a year's time.
Sticking to a budget helped her reframe her perspective too. "These days I value financial security much more than any handbag or fancy vacation," she says. "I've experienced having high-end things — and lying awake at night worrying about how to pay for them. I never want to go back to that place."
But while a refreshed mindset like Plotnick's is essential for long-term success, it's only part of the equation. Your next challenge? Retrain your brain to adjust your actions.
Fitness-financial connection #2: The regimen for long-term success — automation and determination
In the same way that you can't expect to see significant results after just working out and eating right for a couple weeks, it's also not realistic to expect results if you only save money for a short stint before returning to your old habits.
Getting financially fit takes discipline — and it's not always easy.
"Discipline is something most people need to learn," says Manhattan-based therapist Paul Hokemeyer, Ph.D., who regularly counsels people who adopt self-destructive behaviors. "For many, this knowledge comes the hard way — by gaining weight or having a sloppy financial 'physique.' But through these lapses, people wake up to the fact that success isn't a given — it must be earned."
So how exactly do you work on earning that success?
The first step is to establish a foundation. Just as "calories in, calories out" — the idea that you must consume fewer calories than you burn in order to lose weight — is the cornerstone of any effective diet, consider making "money in, money out" your financial mantra. Bottom line: When you take home more money than you spend in a given month, your savings account has a chance to grow.
And a good way to stay on top of this simple call to action is to write down everything you spend. While you may feel nervous about tracking how much you're really shelling out — ignorance is bliss, right? — setting up an air-tight budget and carefully monitoring your bank account could be the exact wake-up call you need to take a look at your financial big picture.
"Keeping tabs on your money can help you see trends on why and how you're spending," Lobel explains. "You start to identify habits and triggers — things like, 'When I hang out with these people, I overspend.' "
Once you understand what makes you give into temptation, it's time to layer on another important success tactic to help keep yourself from continuing those bad habits — automation. It's a strategy Brad Hines, a 30-year-old productivity coach in Boston, has down cold for both his diet and financial priorities.
"With my finances, my credit card is set up to be paid in full automatically each month, and I use a monthly sum of money to automatically purchase an index fund with direct reinvestment," Hines says.
Using this system, he not only maintains a zero balance on his credit card but he's working on growing his portfolio at the same time. By continually — and automatically — investing in his future, setting money aside has become a guaranteed action for him.
The same goes for Hines' streamlined grocery habits. "When I go to the supermarket, I shop off a list of nothing but healthy stuff," he says. "The habit keeps the shopping experience fast, cheap and deters me from deviating and purchasing crap."
Automating these basic tasks can be a good way to avoid getting suckered into deals that look too good to be true, Lobel notes. "Just like you might be tempted to buy an additional bag of Oreos, since they are 'Buy two, get one free,' saving in a well-allocated portfolio helps ensure you don't chase the hot stock or mutual fund."
As for how to stay on track over the long haul, Benjamin Felix, a 26-year-old former NCAA Division I basketball player and investment adviser in Ontario, Canada, actually channels some of his athletic determination.
"I have set savings goals, just like I used to have weight-training goals, and I know exactly what I need to do to achieve them," Felix says. "So just like I wouldn't allow myself to miss a workout, I will not allow myself to miss a monthly deposit into my savings. I allocate the amount I need for fixed living expenses, and only allow myself to spend the amount left over on non-necessary items."
In this way, Felix's extra money is akin to leftover calories: If he finds himself with a surplus after a long workout, he can allow himself a treat without sacrificing his overall goals — another planner-approved strategy.
"By treating yourself, you get to enjoy and savor what it is you're working for," Lobel says. "And it gives you more incentive to keep going."
Fitness-financial connection #3: The secret ingredient for lasting success
As you may have figured out by now, the process of managing your money is a marathon. And it just may pay off to be the patient tortoise — not the overconfident hare — in the race toward success.
"In the weight room and on the basketball court, trying to achieve a long-term goal too quickly by overtraining will cause anyone to either give up or get injured," Felix says. "The same idea applies to money — saving is a long-term game, and it has to be spread out over a lifetime, in a disciplined manner, to be successful."
Translation: Setting unrealistic financial goals is one of the easiest — and fastest — ways to get knocked off track.
One way to define reasonable goals for yourself? Consider building some wiggle room into your get-fit action plan. It's a strategy Lobel says can be "absolutely crucial" in order to help keep yourself motivated on the journey.
It's precisely why Plotnick has started allocating a set amount of cash each month into envelopes for non-financial priorities like clothing ($100), hobbies ($100) and vacation savings ($200).
"With my new approach to financial fitness, I still do the things I love but with much more awareness," she says. "And I don't feel deprived at all."
For example, she does most of her clothing shopping two times per year — once in late summer and once around the holidays — to get the best deals. "Because I've already saved a few hundred dollars in my clothing envelope, I can take advantage of those sales," she explains.
Hines has also identified an approach that helps him stay on track when it comes to shopping and dieting. "Sometimes looking at things to buy in the store, maybe even putting them in your cart — but not purchasing them — can serve to trick you psychologically," he says. "It works both to save money and to keep me from purchasing things I don't really need."
In other words, it provides him with the exhilaration that's associated with a shopping rush without putting a major dent in his bank account.
Of course, nobody's perfect. Every once in a while, you probably will purchase that junk food (or the fancy tech gadget). And that's O.K., because wiggle room isn't just necessary to keep you on track — it can also help get you back on the wagon if you've fallen off.
Ever disciplined, Hines has even crafted a system for jump-starting his progress again if he's gotten off track.
"When I don't have any willpower left to eat healthily anymore, work out or keep track of my money, rather than take my hands completely off the wheel, I will just do one tiny thing," he explains. "I'll do a few pushups, floss my teeth, monitor my savings — anything — and this often replenishes a bit of willpower to resume tackling bigger and more important goals."
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