Have a Well-Stocked Emergency Fund
There are many reasons why you might need to dip into your emergency fund, including natural disasters, traffic accidents, and medical emergencies. You should, of course, have your own reserves to cover these circumstances.
The recommended amount of money you should have in your emergency fund, called “the magic number,” varies. Most financial experts advise that you should aim to have enough money in your emergency fund to cover at least three to six months of necessary expenses.
Distribute your emergency fund as evenly as possible. Have money set aside for the unforeseen. An emergency could happen at any time and without any warning. If you run out of money, a last-minute loan from a private lender could be just as costly as a savings account in a bank. If you have the funds readily available, you’ll be able to deal with financial emergencies in a more effective way.
Get Out of Debt – Completely
The most important good financial goal that anyone can have is to get out of debt.
Debt affects you in two ways:
Debt takes away from your current ability to save – and keep more of your money for yourself.
Debt constrains you in the future, making you stress about the money you will need to repay.
Although most people have debt at some point in their lives, debt should not be a lifestyle. The problem has become particularly serious in the last couple of decades with the growth of consumer credit. And now, with the current financial crisis, many American consumers are struggling to hold onto their homes, pay for college tuition, and find their way back to financial independence.
None of these setbacks in your personal finances are set in stone. If you follow the principles in this book and pay off your debt in a strategic order, you will be able to get out of debt easily – and fast. You will also be able to avoid making the same mistakes that brought you here in the first place. And if you learn how to save money, invest money, and build wealth, you will be able to make your financial situation anything you want it to be.
Get a head start on debt repayment – speed up the whole process by paying off credit card debt first.
Plan For Early Retirement
The financial industry is filled with folks who are passionate about their jobs. It is very difficult to achieve financial freedom when you enjoy your work so much. This is why you need to plan for early retirement when you’re still in your 30s or 40s.
Starting early in your career is the best time to build wealth because you’re a long way from retirement when you’re still in your 20s and 30s compared to later in life when you’re in your 50s and 60s. You may also not have a family to consider yet, which will allow you to take greater risks in your investing than when you’re older and have a family to care for.
If you’re in your 30s and are already saving for retirement, consider accelerating your retirement savings. Instead of going for a target that’s 15 years away, aim for a 7-year target. This will give you an opportunity to enjoy the fruits of your labor and pursue other passions in life.
Create Multiple Income Streams
You’d have to be living under a rock to not know the importance of having multiple income streams. It’s better to have multiple income streams rather than putting all your eggs in one basket. Why? Multiple income streams means:
You can easily bounce back after an unfortunate event.
It makes you less reliant on a single income source.
It can provide you with additional safety net.
It gives you more freedom and flexibility.
A lot of people are working jobs that they don’t necessarily like now but they’re working toward living their dream life later. It’s good to have multiple income streams because it gives you the flexibility to shift from one job to the other until you find what you want to do for the rest of your life.
You need to create multiple income streams that work well together. Otherwise, you won’t have a good support structure. Building your dream life is about creating all the pieces. Then you put them together to see how they fit together. You need to talk to a financial expert to help create your next financial strategy.
Have Enough – But Not Too Much – Insurance to Cover Contingencies
When buying insurance, it’s important to make sure you have enough, but not too much to cover the money you need if a major contingency happens.
What’s a contingency? Life is full of unexpected events, such as medical problems, job loss, and natural disasters. In the old days, these events would have been covered by extended family. But in today’s society, where families tend to be far-flung, it’s hard to find family who can help you out when you need it. And so, it’s crucial to have insurance in place to help you cover these unpredictable and potentially devastating events.
When you’re thinking about buying insurance as protection against a contingency, always ask yourself: “‘If this event happened to me, would I have enough money to cover the expenses?’” If the answer is no, then buy more insurance.
A lot of people get the decision wrong. They fully insure their home and auto, and over-insure their health. As a result, they are often under-insured for everything else.
Be Able to Live on Less Than You Earn – No Matter What
Making more money is great, but if you have no idea how much you make, you can’t possibly know how much you spend. If you aren’t tracking your expenses and income, consider downloading an easy to use app like Mint or Personal Capital. Tracking your income and expenses will give you a better understanding of your cash flow. It will allow you to make sure that you are living within your means. More importantly, it will also help you quickly identify issues you might have with spending.
It’s easy to spend more than you earn when you’re not tracking your expenses. If you are a paycheck-to-paycheck earner, this is more important than ever. Start tracking your spending starting at the end of this week. Make it a habit by doing it every Sunday.
End Any Addiction to Stuff That You May Have
Make a plan for getting rid of your stuff. Action is 90% of the challenge, so do it today. Get started transitioning your things to a smaller space. You have to store them somewhere while you’re waiting for them to sell, so you might as well get started now.
Make a list of all of the things you’re considering discarding. You’ve got to be honest with yourself here. Go through each item and ask yourself if you need it, really need it. Do you rely on it? Does it still work? Does it fulfill your needs? If it still checks out for all of the above, ask yourself “Do I treasure it?” If there’s an item that doesn’t do any of the above, if it doesn’t matter, if you don’t care, if it can be replaced or if you don’t treasure it, then get rid of it.
Start making some room and then outfit your new home with the things that are really important to you. You’ve got to be honest with yourself. You’re only going to be able to downsize if you go through each item.
Plan to Do Work That You Love
In 1992, award-winning journalist Paul Bailey gave a speech at the RSA (Royal Society for the encouragement of Arts, Manufactures, and Commerce), in which he outlined his finances and difficulties in the workplace. He vowed to find a job that he would love, and do what he dreamed of doing. 26 years later, Paul Bailey, now a famous journalist, has been doing what he dreamt of doing for the past 26 years.
What’s really astounding is that Paul did not need to work hard for this career. All he needed was to follow some simple steps. Do the work you love. Follow these steps, and you can get the career you always wanted in one year. Work you love, and your business will grow!
Get Comfortable Sharing Your Good Fortune
Do you often find yourself putting off paying other financial responsibilities to make tax payments? How about skipping paying your bills because you hear a cool investment idea? Will you do whatever it takes to make your quarterly estimates or will you trade profits for ease? Maybe you always find yourself paying the minimum when it comes to insurance or retirement contributions. It’s easy to rationalize these actions as you’re driving to pick up your kids from school or when you’re trying to finish your taxes. However, as long as you get caught up with things like these, you will never reach your financial goals. What you need to do is think twice before you spend your money, get your acts together, and pay yourself first.
Let’s face it. You want your money to be secure, grow and be readily available for your future needs. You also want to be able to share some when you’re wealthy. So if you plan to be a millionaire someday, let’s check out our top 10 good financial goals that everyone should have for 2021.
Plan to Leave Your Financial House in Order Upon Your Death
“If you take care of the pennies, the dollars will take care of themselves.” It’s an old saying, but it’s true. And for you, this particular saying is a reminder to be frugal when you spend money.
This is because while saving small amounts of money will not do a lot for your future, it is always better to save a few extra dollars than not to. The good news is that as you become better at managing your money and growing your retirement account, you should have an easier time saving small amounts of money.
And if you create a plan to be frugal when you spend money, you will inevitably have a plan to save. By planning to be frugal when you spend money, you will also plan to save money.
When you begin making plans for your financial future, you will begin taking actions to ensure your future is one you’ll enjoy. And one that you can be proud to share with your friends and family.
When you have goals, you’ll have a plan for your future. And when you have a plan for your future, you will have an easier time achieving your dreams and goals. And it all starts with planning to be frugal when you spend money.