THEY Are Not Going To Fix It For You
The reality of money problems and the 6-steps to financial freedom
By the time you read this, the U.S. national debt might just reach the 16 TRILLION dollar mark. That translates as roughly $140,000 of burden for every U.S. tax payer. Take a good look at the racing numbers – visit www.usdebtclock.org. Then ask yourself, what can I do about it?
I always tell people, “You have to be real to be rich.”
Obviously we have no control over what the stock market is doing, but when it comes to our money, we can take responsibility for what we are doing. That means facing your numbers, however bad they are. Don’t wait on a parent, a spouse, or the government to do something to fix it because obviously, that’s not a good plan.
When planning for your RichLife,
you can only fix what you can control.
What follows is a 6-step plan that puts you in the driver’s seat on the road to financial freedom. This is a simple check list that when applied, can lead you from where you are now to where you want to be.
STEP #1 Face Your Numbers
Your journey to financial freedom begins with identifying where you are now. When was the last time you faced your numbers? Have you taken a good look at your debt? At your income and assets?
In order to create the conditions favorable to reaching your end destination,
you must get clear about where you are now.
Create your money map by drafting up an Income Statement and a Balance Sheet. For the Income Statement, identify how much money is coming in and how much is going out. For your Balance Sheet, calculate the total of your assets and liabilities, and find the difference between what you OWE and what you OWN. This is a snapshot in time of where you stand now.
STEP #2 Beat the Budget
In order to begin planning for your financial future, you want to have more coming in than is going out.
But not all expenses are created equal!
You can often free up enough money to begin with by just
taking a closer look at your expenses.
Fixed expenses cannot be changed or stay pretty consistent month to month, while variable expenses are changed by you. This is where you can have some fun.
To play the BEAT THE BUDGET game, circle or highlight those expenses you can control and identify what you can do to free up that money. For example, bringing a thermos of coffee with you to work each day could free up an extra $150 a month to go towards debt reduction or saving for that house.
Step #3 Live Below Your Means
The secret to building wealth is really very simple. Whether you earn $200,000 or $20,000, you can become wealthy if you have more coming in than going out. Living below your means is the way to accomplish this, and it is one of the key principles to living rich.
If you pay the price of basic disciplines now,
you won’t have to pay the much higher cost later!
What this means is that even though you can afford a higher car payment, don’t! Pay the price now by investing the difference, putting that money to work for you. In a world where people have grown accustomed to spending everything they earn, make the choice to keep the bigger picture in mind.
Step #4 Pay Yourself First
We all know that “life happens” and the unexpected shows up at the worst possible time. Having 3-6 months of reserve funds can save you and your family the next time the economy comes to a halt. Things like that are out of your control, but you can make the intentional choice to live below your means now.
That means getting into the habit of setting aside money each month
to go towards savings, debt reduction,
and long term retirement planning.
To be successful at paying yourself first, make savings automatic. Your company’s 401k, 403b, SEP, or other retirement plan can deduct a percentage of your income pre-tax from your paycheck. You can set up an automatic draft to fund after tax savings like ROTH IRAs, brokerage accounts, and savings accounts. I recommend following a simple 7 -1 -1 -1 rule:
- 70% for living expenses
- 10% for short term savings
- 10% for paying down debt
- 10% for giving away
STEP #5 Spend Local
Where you choose to spend your dollar is just as important as saving. You don’t need to spend more money, just re-direct what you already have budgeted. Consider the following statistic:
If we spent just $10 more a month at locally owned businesses,
over $9.3 billion would be returned to our local economy.
$10 doesn’t sound like very much, but 9.3 billion sure does! Why is this number so high? Because for every dollar you spend local, 68% goes right back to your community! That means better roads, schools, and more support for your fire and police. By making the choice to have your oil changed at the independently owned neighborhood auto shop instead of a national chain, you’re putting your dollar to work for you and your local economy.
STEP #6 Reward Yourself
All of this automatic saving and conscious spending is great, but if you want to stay on track, build in some rewards for all your disciplined hard work. Most successful clients build in buckets or automatic accounts to fill up for things like a road trip to see the grandkids, an annual trip to Vegas, or a deep sea fishing trip with the guys.
Remember, living rich is about living well.
Memorable experiences and time spent with loved ones are priceless and need to be planned and saved for. To put it off is to miss one of the most vital elements when planning for your RichLife.
The clock is ticking. Don’t let the numbers in your life run away without you! Go through these 6-steps and take charge of your financial future today.
What’s keeping you from achieving your RichLife? If you have money questions or are facing a particular challenge during these tough economic times, I’d like to help. Visit www.RichLifeAdvisors.com and click on Ask Beau. I look forward to hearing from you!