With gyms all over town teeming again with fitness junkies, almost everyone is playing catch-up with their fitness goals after a long hiatus from the gym. Whether it’s building muscles, improving stamina, or just getting healthy, all of us can benefit from a good old sweat session.
But what about our financial fitness?
If you’ve been putting off your financial goals for some time, now is a great time to rebuild and reposition yourself to get back on track as we usher in a new year.
Here’s an 8-step wealth workout plan to ease yourself back into it and get financially fit.
Wealth Workout Plan #1: Reassess Your Position
Before you jump right back into your routine, it’s important to first evaluate your current financial position and understand what has changed. Maybe there was a new family addition, or you had to take out a new personal
loan. In both instances, your tolerance for risk may be lower and you are more susceptible to ‘pain’ in markets.
Like any fitness routine, a financial plan needs to be specifically tailored to your needs. Work together with your wealth trainer to craft a financial plan with short- and long-term goals. Remember to be realistic in your plan, otherwise, you won’t feel motivated to stick to it.
Wealth Workout Plan #2: Crunch Those Figures
With a destination in mind, it’s now time to do some number-crunching.
How much do you typically spend every month? What percentage of your salary are you setting aside for saving and investing? Taking inflation into account, are you putting away enough to reach your dream retirement in 30 years?
Commit to your goals and take responsibility for your financial situation, whatever it may be. Don’t be dissuaded easily or quit before you even start going. The path ahead could be painful with many short-term setbacks, but the glory belongs to those with the grit and determination to push through.
Wealth Workout Plan #3: Build Your Financial Core
Having strong core muscles is important to keep from getting hurt because they support your spine. In the same way, a solid core is the base of any financial plan. This will help you get through bad market cycles and accidents.
That’s where an emergency fund comes in to ensure you have a safety net to fall back on. Ensure you have built an
adequate financial buffer of at least six months in living expenses which can help tide you over when times get rough.
Keeping an emergency fund also prevents you from being forced to sell your investments during a downturn and crystallising your losses, thereby allowing you to stay invested.
Wealth Workout Plan #4: Warm Up And Gradually Progress
Nobody should start deadlifting 100kg on their first visit to the gym. As an investor, you should not be piling everything you have into a single investment to generate returns. Take small steps to build your wealth and invest at levels you are comfortable with.
Once you’ve become more confident, you can gradually increase the amount you invest every month to build your ideal portfolio. With a better grasp of the market, you could also load up on more tactical positions to amplify returns by taking advantage of current market conditions or mispricing opportunities.
Wealth Workout Plan #5: Ice That Pain & Spending
Pain management is also a critical element of a wealth workout plan. Investors would inevitably face some ‘pain’ in their portfolio as markets go through different cycles.
But investors can manage this by stacking up on some fixed income and safe haven assets like gold which offers capital preservation by cushioning losses during a downturn given its low correlation.
If you can’t get your budget to balance, consider also freezing some of your worst financial habits by going on a spending diet. Sweet caramel macchiatos and night-outs are nice but learn to resist financial temptations to
lower your cash burn.
Wealth Workout Plan #6: Stick To The Schedule
As any fitness guru will say, it is far more important to stay consistent, rather than to focus on the intensity. This applies to investing too, which gets easier over time as you compound your gains and accumulate wealth.
Much like fitness, investing is really a long-term game that won’t give you immediate results even if you put in all your energy or resources overnight. A shredded body can take months, if not years of consistent training.
Similarly, building wealth also takes time and lots of patience. Legendary investor Warren Buffet only made over 90% of his wealth after he turned 65 years old. A great way to maintain consistency is to practice dollar-cost averaging by investing equal amounts at fixed intervals to ensure that it becomes habitual.
Wealth Workout Plan #7: Target All Areas
Gym bros who focus on chest exercises but skip leg days usually end up with an unbalanced physique. Similarly, you don’t want a portfolio that is lopsided because it is heavily tilted towards a particular ‘hot’ asset class or sector that has made strong gains in the past.
It might look good on the surface, but chances are it might crumble under pressure once the euphoria runs past its peak. Thus, any fitness programme should be all-encompassing by targeting all areas of your body to maximise resilience.
This applies to your portfolio too by ensuring that you have a good mix of different asset classes, sectors, and country exposure so that you stay on top of your game and can endure market drawdowns.
Wealth Workout Plan #8: Enjoy The Process
Lastly, take the time to savour the moment and just enjoy your wealth and fitness journey. You may find yourself hitting a plateau and feeling like you’re not moving ahead.
But investing is a lifelong pursuit, where your success should be measured across years if not decades. The ride could be riddled with short-term volatility, but that’s just part and parcel of investing.
So, keep your eyes on the prize and keep a long-term perspective in your quest towards building wealth.
With this wealth workout plan in place, you should be able to weather any conditions.
About the Author
Lee Sheung Un is an assistant manager of communications & content at AHAM Capital. A millennial, he is still finding that balance between wealth, freedom, and purpose. Views expressed are his own.