Success Element Four: Wealth
Wealth refers to your plans for making money as well as money management strategies. It also includes setting specific financial goals and timeframes for their achievement. How much do you want to earn by what date? Where are you going to live and in what type of house by what date? If you do not set specifics, how will you ever know if you’re moving forward?
Pay Yourself First
You have probably heard this one before. The concept of paying yourself first may not be new but this one single discipline can change your life. Imagine the sense of serenity you will have when you have money put away and working for you and when you have an emergency fund built up to use as a safety net in case you lost your job, were injured and couldn’t work, or some other financial disaster came calling. Although this makes common sense the majority of people do not put this into action. Start the discipline today to put 10 to 20% of your net income into some sort of savings/retirement plan. Build up your emergency fund first (ideally 3 to 6 months of expenses) and a retirement plan second. There are quite a few authors and books on how to save and where to put your money. Check out books by Dave Ramsey or Suze Orman for information/ideas on how to get started and how to manage the funds that you will begin to accumulate.
Do you have specific wealth goals? I am not talking about “I want to be rich”. That is a dream, not a goal. Goals need to be written down and need to be very specific. They need to include what he goal is and how you are going to achieve it. Simply writing down “I will have a million dollars” is not specific enough. You need to write out a plan of action as to what you will do in order to earn the money. What skills to you need to improve on, what is the timeframe this will take, what are the milestones along the way that will let you know you are on track. The more detail the better so that you can clearly see in your mind everything you want to achieve and exactly what you are going to do to get there. If you are married than you and your spouse need to discuss this at length and work out a plan together. If you are thinking start a business and your spouse is thinking save, save, save you are going to have some problems getting where you want to go. You need to be on the same page, working on the same plan and encouraging each other all the way to the finish line.
Be credit smart
Almost all of us have and use both credit and credit cards. Most of us use credit to purchase large ticket items such as a car or a house. Credit makes many transactions both possible and easier. The problem is that many people are not credit smart and have far too much debt. With the exception of a car or the house, you should be paying off any credit purchases each month. If you are not paying your credit card bills off in full each month the purchase price of everything that you purchased goes up. Why? Because the credit card companies are going to charge you interest on the balance. This means that you will end up paying hundreds and even thousands of dollars more in interest over the months and years you have balances on your cards. Remember, your goal is to live on 80% of your income. If you cannot pay off your credit card bills in full each month then you are not accomplishing this goal. Yes, it takes discipline, and it may mean putting something off for a while, but in the end your financial health is much more important than having the new video game, new watch or latest gizmo.
The only status symbol you should care about
Financial health is the status symbol you should be focused on. What is the point of impressing everyone else with the latest model Lexus or the largest house on the block if you are putting your longer financial health at risk. Living on credit is not living. It is too stressful and it will damage your health and shorten your life. Friends of ours recently shared that they had no money saved for retirement. This couple, who are in their early fifties, now have to scramble to secure their future. For decades they have enjoyed nice cars, watches, jewelry and travel. There is nothing wrong with any of that but only if you are simultaneously putting money away for the future.
If you start early with a retirement savings plan time is your friend. The power of compounding works wonders over the long haul. If you start late with a retirement savings plan then time becomes the enemy. You simply do not have the time to allow the power of compounding to works its magic. Your shortened time horizon means you have to shift an even larger portion of your income into a retirement portfolio if you are going to even have a chance at having the retirement lifestyle you envision.
Post a Comment