Don't have lazy money habits: 10 ways to stay 'fiscally fit'

Some people make managing money look effortless. I call these people fiscally fit, and I’ve been watching their money habits for years.

Here are 10 ways fiscally fit people do it.

1. They pay themselves first.

Fiscally fit people passionately believe that putting money into savings is as important as paying fixed expenses like the rent or mortgage. They’ve followed this rule going all the way back to their youth, and they never compromise on it. The pay-yourself-first mindset is the foundation of their overall financial success. Whether they put a specific dollar amount or a percentage of their income into savings or investments, the action is as important as the money itself. It is a display of control over their finances, which in turn enhances confidence.

2. They don’t think in terms of monthly payments.

The fiscally fit are not compelled to take on recurring obligations just because they can afford the payments. The long-term financial impact of the liability is the deciding factor. For example, a $30,000 auto loan at 3% interest for three years results in a monthly payment of $872.44. A five-year loan calculates to $539.06. Many consumers gravitate toward lower payments. But the fiscally fit are motivated to pay less in total interest charges. The three-year note produces $936 in savings over the life of the loan, so that’s what they go with.

3. Money is a consistent and healthy ‘worry.’

Like a low hum in the background of their lives, worry resonates in the minds of the fiscally fit. They aren’t dominated by anxiety, but they view a little bit of worry as healthy because it fosters discipline, encourages patience and prevents them from becoming complacent when it comes to monitoring financial progress. They dismiss financial professionals who say, “Don’t sweat it — I’ll make the investment decisions” and come across as overconfident. They view financial advisors as partners and sounding boards. They don’t make decisions in haste.

4. They know risk is right around the corner.

These individuals plan for risks that can hurt their financial standing, no matter how remote the possibility. They see disability, accidents or premature death as realistic dangers. They prepare through formal insurance planning, usually in partnership with an objective financial professional. First, they maximize their insurance benefits available through work. From there, they buy additional coverage for spouses and fill in gaps in their employer’s benefits. Term and permanent life insurance options are popular. They usually avoid expensive options like variable life instruments.

5. Credit card debt is anathema.

Cash is not king. The fiscally fit use credit cards to gain rewards and perks. But while having access to credit is important to them, they pay their debt in full every month to avoid usurious interest charges. Travel benefits are especially attractive. (See NerdWallet’s best travel cards for 2015.) They review end-of-year credit card statements that organize expenditures by categories, and they use them as a self-check on spending patterns. Areas of overspending are targets for correction.

6. They plan, especially for retirement.

Formal planning validates good habits, uncovers weaknesses and outlines actionable steps to meet goals. These people have no fear or denial in the face of money truths that emerge when a written plan is developed. A clear plan prioritizes financial goals and measures results based on personalized benchmarks, not some comparison to an arbitrary stock index. They don’t get discouraged when things don’t go “according to plan,” because a good plan allows flexibility for various outcomes. Occasionally, expectations need to be tempered when progress doesn’t meet expectations. I’ve seen members of this set take radical steps to secure a strong financial future, including massive shifts in spending and an impressive downsizing of lifestyle.

7. They don’t pay retail.

Fiscally fit people aren’t cheap. They’re just savvy shoppers. There’s no such thing as immediate gratification when they’re buying things like autos, appliances and furniture. Even organizing vacations is an exercise in frugality. This group does their homework and are endlessly seeking deals. They have a tendency to buy used and are known to scoop up floor models. Even “lightly damaged” items are not out of the question. Cosmetic blemishes make for prices too attractive to pass up on washers, dryers, refrigerators and other durables. They do not fall for long-term “no-interest” offers unless the debt can be paid off before interest kicks in.

8. They see money mistakes as ‘forever’ lessons.

The fiscally fit do not languish in the past, but they never forget financial missteps either. They take responsibility for mistakes and refuse to repeat them. Whether it was a “too good to be true” investment that went bust, or lending money to friends or family that was never paid back, they are not afraid to say “never again,” mark financial boundaries and move on without guilt.

9. Emergency reserves are a priority.

The fiscally fit have a passion, even a slight paranoia, about preserving capital for emergency spending. Anywhere from three to six months’ worth of fixed living expenses is optimum. If reserves fall, resources are redirected even if it means postponing retirement funding until replenished. Online banks are increasingly popular compared with brick-and-mortar options because of higher yields, no monthly fees and surprisingly easy access to money when needed. Want to run with this elite financial pack? See NerdWallet’s top high-yield online savings accounts.

10. They know a 401(k) isn’t all that.

The fiscally fit use multiple investment vehicles that complement tax-deferred accounts like 401(k) plans. This provides flexibility when distributions are required at retirement. Having various “buckets” that allow retirees to blend tax-free, capital gain and ordinary income results in greater tax control and can make a difference in whether and how much their Social Security benefits will be taxed.

The fiscally fit know that financial success comes down to good habits, and that these habits are common sense forged into actions applied over the long term. It’s never as simple as it sounds, but don’t fret — small improvements lead to big results over time. And in time, anyone can join the ranks of the fiscally fit.