To attain financial security is probably a goal that many hope to achieve but in reality few people are taking concrete steps to realize this objectivel.
10 steps to help you reach this goal. ”financial security”
Step 1 – Have a plan
Step 2 – Budget and Financial Security
Step 3 – Savings and Financial Security
Step 4 – Easy Money
Step 5 – Do not spare money!
Step 6 – Living without a mortgage
Step 7 – Pension Funds
Step 8 – Minimize taxes or not?
Step 9 – To protect its assets
Step 10 – Seek advice
Let’s start with the first phase of the plan to achieve financial security:
Step 1 – Have a Plan
Having a plan will give you a direction and a path to follow. Easy to say but what your plan should look like? And how to establish it? There are people who have a very clear idea and know their goals and how to get them. For others, it’s not as clear. All of us have objectives or goals we want to achieve no matter our age. To begin drafting your plan, think about the goals you want to achieve and takes time to put them on paper.
It could be something like this:
a) For a young person:
–I want to complete my university studies.
–During this time, I’ll live with my parents and work part time to save $ 50 a week for a trip in Europe at the end of my studies.
–But at the end of my studies, I reserve the right to use that money to buy a car or continue to collect enough money for a deposit to buy a condo or house.
–It’s a good start to plan for financial security.
–This seems to be a bit vague, but it is much more difficult for a person 18 or 20 years to plan.
b) For a married couple with young children:
–Continue to make additional payments on the mortgage to pay for the house in so many years. Reducing the mortgage is –Step in the right direction to achieve financial security.
–Once the house is paid for, invest the money available in retirement funds or buy an investment in real estate, establish an investment plan.
–Be adequately insured if ever one of you became ill or injured or even lost his or her life.
–Set money aside to educated children.
–Plan to be financially independent at age of 60 or earlier.
c) For a couple in retirement:
–Bequeath a sum equivalent to the value of the house. Have a current testament.
–Consult with financial experts to make sure you receive all the revenues which you are entitled.
–Stay in our house as long as possible and live comfortably.
Now that you have set goals, you have good reason to develop a plan and good reasons to follow your plan! I am sure that the student who saves $ 50 a week will be able to follow his plan, the trip he will be able to do at the end of his studies. If he has no real reason to save, how many weeks a student will be able to save $ 50 a week? Not very long, guaranteed! Now you’re ready to build your plan – which is to reach your goals. A financial planner can help you establish your plan, but the first question he’ll ask you is, if you have goals you want to achieve, so you must be well prepared before consulting a financial planner.
What your plan should contain:
- Your goals
- Be very specific
- Have short-term goals (this year)
- In the medium term (1-5 years)
- In the long term (over 5 years)
Your Budget
Making a budget is ESSENTIAL. Most of us are not going to win the lottery or inherit a couple million dollars!
The only way to achieve your goals is to spend less than your income.
Your current financial situation, have the following assets:
- Value of my home $ 200,000
- value of my car: $ 10,000
- Money in the bank: $ 2,000
- Total $ 212,000 (A)
Your debts:
- Mortgage: $ 100,000
- Credit cards: $ 2000
- Total $ 102,000 (B)
I already have a positive balance of $ 110,000 (A-B)
Important task:
- Make sure you have adequate insurance.
- Prepare a testament.
Step 2 – Budget and Financial Security
It’s not easy, most of the time it does not work the first time to establish your budget, so don’t be discouraged. But before embarking on the details of a budget, I want to make sure you understand the importance of learning to controlled your money and not the other way around. Most people don’t save whatever their salary. They earn $ 50,000 or $ 125,000 per year they say without really be wrong that they don’t spare money. I’ve heard them say, if they had an income of $ 125,000 a year it would be very easy for them to save.
Unfortunately, the higher the income, the higher the spending. It seems that this is simply not in human nature to save. Remember your salary when you started working, it was half or a quarter of your current salary? Were you able to live back then with a lower salary? The answer is probably yes. More our salary increases, more our expectations rise. A luxury car, a bigger house ( larger mortgage), annual vacation. Expenses seem to follow pay increases. Difficult to save
Budget and Financial Security – To Remember
What is important is not how much you earn but how much you spend. Most people spend more than they earn because they simply do not know where their money goes. That is why budget and financial security are two concepts that are linked together.
Budget and Financial Security – To Remember
Make a commitment to the concept: don’t spending the money you don’t have. If you take control of your finances, life will seem (and will be) much easier. Does it mean not having fun? Sure Not. I want you include in your budget, allowances for the thing you love to do while saving. Saving is simply essential. If you manage to save regularly you will achieve financial security. I understand that saving is not the most exciting thing but it’s the only way to fructified your nest egg.
Step 3 – Savings and Financial Security
Occasionally, I get email from people telling me what I write make sense but it’s too difficult to implement. The common mistake is that most people set their goals too high. If you had never make a budget and suddenly you decide, you need to save $ 200 a week, I’m sure you gonna find this, a very difficult task and it’s likely you cease to follow your budget to fall back into your bad habits of spending all your money.
It is better to set realistic goals from the start. If you think following your budget will require much effort, began by saving a small amount. Nothing prevents you to change it as you go. I like this example and I’m sure those who are 18 and reading this will also loved it !
If you are saving $ 1 per day between 18 and 65 and you can get an average return of 5%, you should worth at age 65 about $ 200,000! Not bad for a dollar a day. But it is never too late to save and the good news is when we are older we have more money to spend. There are different ways to save, whether with mortgage, pension fund etc.. What is important to understand here is that it is essential to save regularly.
Step 4 – Easy Money
Step 4, one easy step! Let’s put the record straight, one thing I find tiresome is the “Get Rich Quick” because it never works. The internet is full of sites where these supposed experts are ready to show you their secret to get rich in 45 days by only working one hour a day, easy money. Right!
Think about two seconds, the experts want you to buy their “secret” to get rich quickly without working or very little. If their System works so well, why do they not use it themselves? Why do they need to sell their secret? Are they not already rich? Of course they still have a thousand good reasons why they sell their secrets for only $ 67 and only 50 copies are available.
Come on, these scams never work, don’t get tempted, even if it’s cheap, it’s always a scam. I think, it’s human nature “instinct” to try to make a lot of money with minimal effort. When the ads are full of words “get rich easily, will triple your income without effort, money minimum pay, etc.” It smells a scam.
When it’s too good to be true, it probably is too good!
I do not want to dwell on the subject, so always be on your guard before giving your cash, check, do your research, the Internet gives you access to so much information, so quickly, use it to your advantage.
Last word of advice, if you feel there’s pressure to buy now, well wait, there’s a “deal of the century” every week!
Step 5 – Do not Spare Money!
Why would you save money and why should you save? Last year, for example, you had decided to save $ 2.500, would you be able to go to the bank today and withdraw the money?
That’s what I mean by not spare money.
If the money saved is not deposited in a bank account separate from your every day use, it’s likely that the $ 2.500 would be already evaporated!
If you had planned to save $ 2.500 last year, it means, you have set aside $ 50 per week or $ 210 per month.
Where the money gone, you ask yourself? Maybe, it was the month you decide to buy a new I pod, thinking, you will double it next month to compensate?
For most of us, it is essential that the money savings is not accessible.
The best way to save is this way: deduct money directly from your wages and transfer money into a savings account different from your every day bank account.
This is the best and sure way to save money.
At first it’s a bit difficult to adjust, having to live with a little less money but after a month or two you will not see the difference. This is a very effective way to get rich.
The money saved is worth either in a savings interest rates account, or as an additional payment toward your mortgage or your retirement plan.
Step 6 – Living without a mortgage
Generally everyone loves the idea! Yes I know, sometimes renting can be advantageous in the short term, but long-term ownership is more advantageous.
Important
Some experts argue that renting is cheaper than owning and therefore advantageous to rent, it is true in some cases. But one of the reasons, I always encourage to have a mortgage instead of being a tenant is because unfortunately 99% of people will spend that money instead of saving it. When you rent, you will pay less than having a mortgage, the money saved should be invested or deposited in a savings account. So after 25 years of renting, if you have not invested or set money aside, you will end up with nothing. However, with a mortgage you are “force” to save ( MONTHLY PAYMENTS) and after 25 years of PAYMENTS at least you own your house! Ask for more information on the mortgage to pay it up faster.
But here are some reasons why I think that living without a mortgage loan is part of an effective plan to achieve financial security:
Economically, to own rather than rent it is more advantageous.Pay his mortgage is an effective way to save. Bought a house in the right place should always appreciate the long term. Living without a mortgage can be a great motivator to save. Imagine not having to make monthly payments for mortgage …
Important
Living without a mortgage is a great source of motivation, make it a priority, plan to live mortgage-free.
Step 7 – Pension Funds
Make sure you have a good pension fund is part of a good plan to achieve financial security. Whether with IRA, mutual funds, you must plan for retirement as soon as possible.
When you are young and entering the labor market, pension funds is often not a very high priority and rightly so. It’s not a very exciting subject and we realize the costs can increase rapidly, often faster than income (hence the importance of having a budget). But if we start to invest early in a pension fund, the easier it is to retire and have more money for his “golden years”!
It is important to mention that it is never too late to start investing. An effective way is to contribute to a IRA or a pension funds for the tax benefits that its provides. Invest in pension funds is part of a good plan to achieve financial security.
Step 8 – Minimize taxes or not?
We often hear people complain they pay too much tax. But generally the people who pay lots of taxes also have a high income, same thing for investors. An effective way to pay less tax is to have a lower salary! But if you have to pay more taxes year after year, it must mean you’re doing something right, because your salary increases.
Yes, I agree that often our governments spend our tax money not as efficiently as we would like but we still get some benefits in one way or another. However, nothing prevents us from trying to minimize our taxes to achieve financial security. Of course as long as it is done legally, why not take advice from specialists in the field?
This leads me to raise an issue which I think is important. Try to minimize your taxes is one thing, but do not factor taxes to dictates your investment decisions. For example, if borrowing money to invest in mutual funds is a good strategy for you, you should follow your plan. If in addition you are able to minimize your taxes with this investment the better, you should consider it as a bonus.
However, I am less comfortable with the idea of borrowing money, which the first goal is minimizing taxes. The idea of having to lose money I do not have because I wanted to reduce my taxes is not part of my plan to achieve financial security.
Important
Your investment decisions should be made based on potential earnings and not on how much tax you could save with these investments.
Step 9 – To protect its assets
I’m sure you realize protecting assets and financial security go hand in hand. You must insure your house, your property, cars and other valuables. These are essential and relatively inexpensive insurance.
While this seems obvious to have insurance for the home, its contents and for automobiles, it is surprising how many people live without insurance. A common mistake that so many people will make is to not be sufficiently ensured. A very important asset to insure is yourself. When one is single with no dependent, not loans or any other forms of financial responsibility in this case we can afford not to be insured. But as soon as you have financial responsibilities, spouse, children, you must have life insurance.
What will happen if you were to suddenly fall ill, had an accident or worse if you were to die? Does your family will be able to maintain the same lifestyle?
So protecting its assets is part of the plan to achieve financial security.
Step 10 – Seek advice
Many questions will be raised if you follow this plan. Now with so much information available through the Internet, it is probably easier to find answers to your questions.
However, it may well be that you feel the need to speak with an expert. Financial planners are there to help you answer your questions.
But, you don’t need to be Einstein to develop an effective plan. Follow the 10 steps of this plan can be a good start as the rest of the information available on this site.
Consulting a specialist might be a better solution. If you decide to consult a financial planner, you should still use this 10-step plan as a guide.
Don’t be totally dependent on the specialist but rather work with him to develop the best plan to improve your financial position.
