Let’s face it, we all want to be wealthy or at least have what I like to call financial independence. However, only a small percentage of the population achieves this dream to where money isn’t something they worry about. They’ve taken the correct actions over several years, which has given them the freedom to do as they wish.
While being wealthy or having financial independence can mean many things to different people, it comes down to what it is you want your life to look like if money weren’t an issue. Today, we will look at the 5 most important money moves that will help you achieve this journey. None of these will happen overnight, but all can be easily accomplished.
We’ve all heard this one before, but it seems like it takes many years for it to finally soak in and action is taken. Treat all of your savings (emergency savings, retirement, 2nd home, etc.) as if it were a fixed expense just like your mortgage, utilities, etc. Your savings should always be budgeted for first, and then you can factor in variable expenses like entertainment, travel, etc.
Most people do it the exact opposite and save whatever is leftover at the end of the month. Well, guess what, rarely is anything leftover at the end of the month, which means no savings. If you save at the beginning of the month, then you know it’s going to happen.
Your retirement plan is easy enough because it comes right out of your paycheck. However, for any additional savings, it should be set up to automatically be contributed to the appropriate accounts the day after your paycheck hits your checking account. This will get the money out of your account immediately and ensure you’re always paying yourself first.
People who are wealthy or who have financial independence always know their cash flow. They know what’s coming in and exactly where it should be going. Sure there will be some exceptions here and there, but for the most part, they know their cash flow in and out.
Guess what? It’s not that difficult. Start with what you have coming in monthly and then set up your budget for where that money needs to be earmarked. The first thing that should be budgeted is your fixed monthly expenses, including all savings. From there, you see what is leftover and then allocate that to your variable monthly expenses.
Finally, it’s now a matter of tracking it. It’s great you actually created a budget, but the most important part is tracking it and ensuring you’re sticking to it. Don’t worry if things veer off course every once in a while. Life happens. Make adjustments as needed, but, most importantly, stick to it!
This is more geared to how you have your money invested, but it can apply to anything you’re paying for in life. I see so many people who have signed up for something in the past that’s costing them $20 a month, and they haven’t used it in six months, but they’re still paying. Stop doing that!
If you have any recurring debits happening in your checking account or credit card for services or apps that you’re no longer using, cancel them. It’s super easy, and you’d be amazed at how these small monthly fees add up.
Finally, with your investments, know exactly what you’re paying in fees. The less you are paying someone else, the more you’re increasing your return. If there’s value being provided for the fees, then you must justify if the fee is warranted. However, if you’re not getting a better return than a cheaper alternative then it probably makes sense to go with that less expensive mutual fund or ETF.
Bad debt can mean different things to different people, but to me, it includes anything high interest. This consists of credit cards, student loan debt (in some instances), personal loans, and any other debt you might have that has a high-interest rate.
If you happen to have any of this bad debt, then it should be priority #1 to get paid off first. The less you’re paying someone else in interest, the more you get to keep and save/spend for yourself.
Debt can be extremely emotional for some people, and I completely understand. The relief I see from someone when they pay off their credit card or even their car is truly remarkable. Not having that burden dragging them down anymore is one of the most positive impacts in their daily lives. It truly will make you a happier person.
With this being said, you still have to live your life because no one knows how long it will be. You don’t have to save every dime or clip coupons, but you do have to be cognizant of your cash flow.
Some folks may be in a tough debt situation where they must cut back, but it doesn’t have to be forever. Once you’re out of that tough place, begin to save and build, but still live your life and enjoy it
Your life shouldn’t have to revolve around money. While money plays a role, it shouldn’t be what consumes you. Follow the previous four steps, but never forget about this fifth one.
The hardest part with these money moves is just getting started. As I mentioned before, none will just happen overnight but, also, none are that difficult to implement. Do what most people don’t and take action. Stop thinking about doing it and simply do it!
NextGen Wealth, LLC is a registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities product, service, or investment strategy. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor, tax professional, or attorney before implementing any strategy or recommendation discussed herein.
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