A Bride Worth Billions (74 page)
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Authors: Tiffany Morgan
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Many wealthy people go bankrupt because they lack knowledge on how to manage their finances. Many people aspire to be financially independent but only a few succeed. Most people do not know how or where to begin the journey towards financial success. It is a journey filled with challenges and detours that only a few are able to surpass. Those who made it can attest that being informed and knowledgeable on matters relevant to financial management and investments can greatly aid them in their undertaking. It is therefore important to educate yourself on the all aspects related to money for you to at least, grasp the idea of what it truly means to be financially independent.
Knowledge is power
Knowing how to handle your finances does not have to be cryptic. Educate yourself on personal financial management. Browse the net for valuable information on how to manage your finances, save and invest wisely. Read personal finance blogs such as the “I Will Teach You to Be Rich”, “Lifehacker” and “The Simple Dollar”, to expand your knowledge.
You can also read informative eBooks that tackle how to manage your money, gain savings and astutely invest the surplus in investments. There are so many books out there, which will help you learn the basics of financial management including how to create a budget, track your income and expenses prudently and pay off debts carefully.
You do not really need to agree or believe in everything that you read in the net or in a book to get some valuable information from it. Not everything that you read will be informative, but note that you can utilize every little detail that you get from your research in your attempt to succeed financially. Just learn to pick up the important things that will help you achieve your goal.
Lifelong Endeavor
Attaining financial freedom is not an easy quest. It is not an overnight deal either. It takes a lot of time, effort, motivation, determination, sacrifices and hard work for you to be able to achieve it. You need all the important data that you can find to equip you for this rather difficult, yet very attainable goal. As they say, what your mind can conceive, it can achieve. Your success depends on you, on how you handle things. If you put your heart to it and arm yourself with the necessary knowledge and habits, then you can attain financial independence in due time.
When you embark on a particular undertaking, you need to plan everything before taking the first plunge. You just do not jump right away without making any plan if you want to succeed in your goal. Having a plan eliminates waste of time, effort and resources in the achievement of your goals.
You need to establish the big picture first, your main goal, in establishing a plan. The big picture will set the way and the rhythm of the endeavor. This is the light at the end of the tunnel. This will guide you as you traverse each step through that darkened tunnel.
Clear-cut long-term goal
When you set a goal, you need to be specific about it. Vague goals will lead to vague plans, which will only prevent you from reaching your goals. If you do not know where you are heading, you will likely get lost in the transit. That is why it is important to know what you really want to achieve in the end. There could be no room for mistake since you will direct all your efforts to that end.
For instance, you establish a goal of having a $1 million savings deposit in your account and another $1 million on high-interests yield investments when you turn 40. That will be your long-term goal; therefore, it is advisable to direct all your efforts towards the attainment of that goal. You then concentrate all your short-term goals towards the achievement of the big picture.
Flexible
You need to have flexible plans in order to succeed. There must be room for last minute changes and revisions, especially since money and investments are among the most volatile things in this world. If you have envisioned yourself attaining financial success after just 15 years without taking into account the recession and all that financial plunge-down, you will be in for a great disappointment especially if you do not devise your plan in such a way that will cushion these inevitable circumstances. Your plan should take into consideration factors that may affect it such as inflation and recession, among other things.
In Writing
A financial plan or any long-term plan for that matter should be in writing. The plan will serve as your guide towards the achievement of your established goals. You just cannot memorize it and expect to keep all data in order after several years. Besides, a plan should be tangible to enable you to chart your progress easily.
For instance, with the aforementioned long-term goal of having that $2 million savings and investments, there should be a written long-term plan on how to achieve such target. You should also include in the plan the estimated target time and the things you have to do to attain your goal.
Achieving such a goal after 15 years seems so farfetched especially if you are a mere bus driver. However, if you will sub-divide this big goal into smaller and more attainable goals, then there is a better chance that you will indeed gain financial freedom in the end. So, what are the examples of these short-term goals?
SHORT-TERM PLANS
These plans are prepared to achieve something in a shorter time span. For example, to achieve the main goal, you need to prep up yourself and channel all your short-term efforts towards the attainment of your targets. People normally lose focus if they concentrate only on the big picture. By setting up short-term goals, you will be able to see tangible results of your efforts in short periods of time, which would motivate you to do more and move forward towards the attainment of your long-term goal.
Attitude Change about Money
If you want to achieve financial success, the first thing you need to do is to change your point of view regarding money. Most people have not been able to accrue a substantial amount of wealth because they do not understand the nature of money and how it works.
Money is a tangible thing. Every time you go to work, you are selling your labor in exchange for money. The more labor you put in, the more money you earn and the more assets you can acquire with it. Money is more than just a paper. Money is a mode of exchange that facilitates trade. Its value fluctuates depending on inflation and other factors such as government and economic issues.
If you do not change your attitude towards money, you will end up having less of it. If you spend all your money to acquire things then you will have no savings or surplus to invest. You will acquire numerous assets or things, but you will not have anything to spend in case of emergencies.
Be Debt-free
One example of a short-term goal, which is in line with your long-term goal, is to live a debt-free life. Debts accrue interests, surcharges, penalties and fees. All of these elements can only add up to your expenses, instead of increasing your savings. Pay off your debts. List down your debts according to the interests you need to pay to generate tangible, immediate results.
If you pay off your debts with a higher interest rate, then you will reduce the amount of interest that you will have to pay on the remaining balances. Just imagine having a debt of $5000 at 20% as compared to a $10,000 debt with 3%. If you will pay first the $10000, you will have an additional $700 interest payable ($1000-$300) if you will settle the debt with lesser amount. The rationale behind this is that accounts with high interest will get bigger with the penalties and surcharges if you will not be able to pay them on time. Having them out of the way first will literally make life easier for you.
Be wary of credit cards or do not apply for one, if you can help it. Credit cards may seem useful but if you are not wise in using it, it can bury you in debt. Make cash purchases. Buying using your card can make you careless and you might end up paying for the goods much more than their real worth. If you are using cards, make sure that you pay more than the required amount each month. Do not incur credit that you cannot afford to pay at the end of the month. If you want to live a debt-free life, you need to learn how to live on cash basis or on what you just can afford now.
Prepare a personal budget
To be able to manage your finances, you need to have a sort of guide or script on how to spend your money. You need it to ensure that you only get to spend your money on the things you really need to spend on and still have some surplus for future use. Without a written, well-prepared budget, you will easily get lost with your spending and will have a hard time sticking to what you originally planned to do with your finances.
Cut down on your expenses
You might not easily realize it without the aid of a well-prepared, written budget but there are many expenses that you can actually do away. Gradually and regularly reducing your expenses can make a lot of difference in your finances. To be able to achieve this, you just need to distinguish your needs and wants. Track down your expenses to see what you can cut out without sacrificing basic needs and comfort. Live frugally and you will reap the benefits of your sacrifices in due time.
Pay your bills on time
Settle your bills on time so that these will not accrue penalties and surcharges. This is one good habit to cultivate if you want to gain the upper hand in managing your finances well. It is also wise to have it automatically deducted from your salary. You may also apply for some auto-debit arrangement with your bank.
Save for rainy days
To protect yourself and your family from inevitable events, set aside funds for emergency. If possible, get a life insurance for each member of the family. Choose the insurance scheme that works best for your circumstances.
Augment your income
If you want to reach your long-term goal of becoming financially independent, you need to increase your income. This is possible by having more than one source of income. This way, you can save more and you will have a cushion in case you will lose your primary job. There are several ways to boost your income. You can take part-time jobs or cultivate a stream of passive income such as dividends from stocks, rent from real estate properties, royalties from books, interest on owned bonds or certificates of deposits and the likes.
Capitalize your money
It is a wise decision to keep your money in a savings deposit account. However, if you want to attain financial freedom, it would be wiser to invest your money to boost your income rather than let it sleep in your bank. Of course, it will earn interest over the course of time but when wisely invested, such money would earn up to 200%. The increase in income will definitely give you the edge to achieve your target of financial independence sooner.
One of the best ways to achieve financial success is to keep track on the coming and going of every penny. Keeping tab here means you need to keep track (written) of your source of income as well as where you spend your money on. This method is vastly different from just thinking of where your money comes and goes.
The methods you will utilize in keeping track of your spending do not matter in this case. You can use a plain notebook and pencil for all its worth. The important thing is that you keep tab of where your money flows.
Make it Habit
Keeping tab on your finances should become a habit that you need to stick to no matter what. Just make sure to do practice this habit regularly to make this work. Make this habit a part of your mindset as well. You will soon get used to the idea of recording every financial transaction over a specific period.
Record transactions immediately
If you will put off recording your transactions, you will either forget all about it or make mistakes with the numbers. The earlier you do the recording, the better. Record it immediately after every transaction, if possible. A notebook and pen will be handy. You can also use several computer applications to record your transactions easily. You can then organize and categorize the data appropriately.
Do not misrepresent the numbers
You need to be honest with your recording. Do not misrepresent the numbers since you are trying to gather data here, which you can use to achieve your long-term goal. Misrepresenting the numbers would only be like fooling yourself. A budget based on misrepresentations will not let you achieve your goals.
Create a budget
After a few months of keeping track of your spending, you can now use the data you have collected as basis for developing a budget. It is important not to bypass this stage since creating a budget out of thin air is quite ineffectual. Why create a budget? If you want to know the truth, budgeting is the one important thing that differentiates the wealthy from those who are not. According to study, more than 50% of wealthy people are keeping a budget.
