How can you achieve Financial Freedom with your current income?
The Secret to Personal Financing
Before you start jumping into the investment bandwagon. It is important
to ask yourself some fundamental questions. Are you one of those who
can't seem to save much money despite the regular salary you are
getting? Even with that last promotion, that last raise, the money in
your bank account just seem to dwindle away every single month? Do you
simply spend without any financial targets and hoping that your savings
will be sufficient for your investment purpose and make you rich? Do
you believe that your corporate pension plans or your 401K plan is
sufficient for you retirement? If your answers are Yes to some or even
all of them, like the majority and you will never be rich. Unless you
are able to manage your personal finances, you will never be able to
accumulate sufficient wealth even if your investments are able to reap
you additional $10,000 every month. It will just be like your last
pay-rise and the money will disappear as quickly as you earned it.
So what are the Secrets to personal financing. I have put together 5 tips to get you started.
1. Have a Financial Goal
One of my favourite quote of all time is from Alice in Wonderland's
Cheshire Cat, 'If you do not know where you are going, any road will
get you there'. So if you do not have a financial blueprint laying our
your financial goals, you will never be able be financially free and
become rich and wealthy. Your financial blueprint must have a definate
target to include how much money do you want to make and when you want
to make it by. You will subsequently break it down to what that equates
to per year starting from today and even down to your monthly targets.
Share this target with someone close to you. This will not only help in
ensuring that your plan is a realistic one, it will also help you
commit to it!
2. Keep track of your Finances
You must be able to keep track of your spending habits. It is only
through this discipline that you are able to identify what you are
spending your money on. Are you spending a disproportionate amount of
money on dining-out or your on your spanking new sports car? How about
your credit card payments? Are you rolling-over with the minimum
payment sum and paying the bank hefty 12% interest on your outstanding
bills? Are there any other ways to lower your mortgage rates? Keeping
track of your finances is much simpler today than yesterday. With the
advent of Internet banking and credit card services, it is quite easy
to compile your finances electronically with your electronic monthly
bills and the only item you have to track daily is your cash
expenditure. All you need is to set up a simple template on your excel
spreadsheet (You don't even need fancy financial software here!), and
off you go. You will be able to know what your monthly cash-flow state
as well as your nett worth.
3. Pay yourself first
Ok, now that you have a goal, and you are actively keeping track of
your finances, you will know how much and how you are able to set aside
some money to grow your wealth. A simple and effective way to implement
the Pay Yourself First strategy is to open up a separate 'investment'
bank account and effect a standing order for a fixed amount of money to
be transferred from your main (salary) account to your investment
account on the same day when your salary is being credited. It is a
fact that our bank account balance influences the way we spend and
without this strategy, we will not be able to accumulate wealth.
4. Insure yourself
Many of us often overlook the importance of personal insurance and
forget that our bodies and minds is THE factory to wealth. If we were
to be incapacitated, we must be able to continue paying our medical
bills, our mortgages, and other basic expenses. Hence, we should look
at insurance as a form of 'investment' and in fact, it is the only form
of investment that reaps immediate returns! The moment you pay your 1st
premium, you're covered! Thus, setting aside money for insurance is
almost as important as the pay yourself first strategy.
5. Dollar cost averaging
The dollar cost averaging investment technique is a time-proven
strategy that will overcome the need to time the market. This strategy
calls for us to invest on a regular basis such as investing $100 per
month and keep this money invested over a long term. The theory behind
this is that it reduces emotional trading and smoothening out risks.
Statistics has also shown this to be a relatively fail-safe technique.
I would like to emphasize that it will take a significant amount of
discipline and commitment for you to get started and for these tips to
work. But I'm sure, with your Millionaire Mind, you will succeed and
start off with the right track to the road to riches!
