Friday, September 14, 2018
A Blueprint to Financial Success
I try my best to make personal finance as simple as possible. My industry is full of convoluted advice that confuses people, sometimes intentionally. The real success stories are not a wonder stock or a sharp real estate deal. The true victories are gained with wise-decision making, limiting mistakes and consistency. Today, I will show you my Blueprint to Financial Success. While it may not be as sexy as the next Amazon Stock, it is tried, tested and true.
1) Earn as much as possible
While this may seem like an obvious statement, the reason why this is important may not be. There will always be people who live on or close to the poverty line. Having been there myself, I know how hard it is to get by, let alone get ahead. It is actually near impossible to save when you make so little. The solid truth of the matter is that you need to earn more money. The same thing is true for people with larger families or extenuating circumstances. There are some cases when you just can’t spend any less than you do on necessities like housing and food. Making more money is the only option to get ahead and live the life you want instead of living the life you have to.
2) Avoid debt like the plague
While we all know having debt sucks, the deeper reasons behind it may not be as obvious. Debt kills your monthly cash flow. Anytime you have to pay a monthly bill of debt, it prevents you from enjoying that money yourself or saving for the future. You almost always have to pay back more than you borrowed and in some cases, much, much more. Most importantly, paying off debt wastes time. Time is your most precious ally in the financial freedom world. Time allows the money you save and invest to grow. Time also allows the money you owe in debt to grow. Kind of gross right?
3) Get a Tax-Free Savings Account or Roth IRA
I have said it before and I will say it again, everyone should have a TFSA, or for my brothers and sisters in the States, a Roth IRA. The reason is simple, it’s Tax-Free. While we all know that we should be saving and investing money, many of us don’t know the tax implications of watching our money grow. I have had many clients act shocked and appalled when they have to start withdrawing from their Registered Retirement Savings Accounts and the taxman calls their name. The TFSA, on the other hand, is completely tax-free upon withdrawal. For this reason, I believe everyone should have one, especially young people. For them, it should become the retirement savings vehicle of choice.
4) Buy Cheap Term Insurance
While you are young and have no estate planning goals, cheap term insurance should fill the bill quite effectively. Insurance protection is an absolute necessity and term allows you to get the most bang for your buck. I offer starter protection packages that guard against injury, illness, and death for a few bucks a day. This type of coverage allows you to stay in your home should you get sick or have your family carry on without financial disruption should you die prematurely. Getting it while young ensures it will be as affordable as possible.
5) Contribute 10% to long-term savings
A generation ago people contributed 10% of their earnings to the church. This generation should make a habit of doing the same thing, but to your future self instead. If you put away at least 10% of your earnings in your working years for long-term growth, you will retire comfortably. You will not struggle to meet demands in your older years and you will live on your terms. This is not a matter of opinion, it is a fact. Get into this habit as early as possible to see the best results.
6) Keep fixed expenses low
There are certain things in life we cannot avoid. We all need somewhere to live and we all need to eat. Most of us need some form of transportation and amenities like electricity cost money too. The important point is to try hard to keep these expenses as low as possible. Do not overbuy when you get a home. Do not purchase a car you cannot afford. Do not dine out for every meal as a source for your daily nourishment. If you can keep these expenses low, you will have much more money to enjoy life and save for the future.
7) Pay off your home
The expense of a mortgage is a heavy one. For most people, it is the largest monthly expense they have so to pay it off before, or well before retirement is essential to their success. If you somehow manage to be mortgage free by the age of 50, you will have a huge gateway to early retirement. Carrying a mortgage into retirement is very costly, mainly because your income almost always drops. Having to service a mortgage later in life could delay or force you to forego retirement completely. Make it a goal to be mortgage free.
8) Always improve yourself
The average person will have more than 4 careers in their lifetime. Outside factors like the economy and business structure can make employment precarious so it is important to constantly be upgrading your skills. Doing this will allow you to roll with any occupational setbacks that may occur. It also allows for you to confidently ask for a raise or promotion when the time is right. Employers want to see that someone is eager to learn and grow. More importantly, you will feel more confident in yourself and that will work wonders for your pocketbook.
9) Pay yourself first
This phase is an old one, but it still rings true. We often get so wrapped up in the day to day or month to month that we forget that our biggest obligation is to our future selves. No one will take care of you when you get old, or at least you should assume that. The government doesn’t care, your boss doesn’t care, and the people around you have their own problems. Think of it this way, every month you put something away for retirement is another month you get to live comfortably when you are retired. It is literally that simple. If you do not pay yourself first, your future self will suffer.
10) Be relentless
We have a weird duality in our current society. We all want to be rich, and the wealthy get worshipped on a daily basis, yet we also blame them for our ills. The one thing wealthy people have in common is the relentless pursuit of their goals and dreams. You must be persistent when it comes to what you want in life. Whether it is with school, your family, your career or your health, dedication is the key to success. Procrastination leads to apathy and apathy leads to inaction. I hate to sound too dramatic, but you almost have to be willing to die for what you want. It is only then that you will sacrifice what is needed to get it.
I believe full-heartedly that everyone can be wealthy. I believe that everyone can accomplish the goals they have in life. All it takes is dedication along with wise-decision making and you can get there. I have seen too many instances of humble beginnings leading to amazing outcomes to not believe it. It will, however, require you to think outside of the box we all sometimes put ourselves in. Do that and the sky’s the limit. Don’t, and the limit’s the sky.
“Success isn’t always about greatness. It’s about consistency. Consistent hard work leads to success. Greatness will come.” – Dwayne Johnson
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