Building and Maintaining Financial Freedom
With the arrival of 2005, many of us have redirected our goals in an attempt to achieve and maintain a variety of positive attributes. Many of us have decided the time has come to lose a few pounds and get healthy while others have resolved to increase their financial well-being this year. Both have very positive effects on our lives, which allow us to leave a legacy for our children and grandchildren. The development and maintenance of a positive financial foundation is appropriate for anyone, whether you have a million dollars in the bank or are just starting out. Maintaining your wealth is just as important as building it in the first place.
Once you've decided on a solid, personal wealth-building plan, make sure you don't stray far from your approach. Find a method and stick to it. Don't change the plan along the path to financial freedom. Never allow emotion to guide you, but rather map out your strategy and follow it, just as you would follow a roadmap to get from point A to point B.
Building your financial independence depends on a lifestyle change from you. You must change certain habits to build your financial reserve for 2005 and beyond. Decide where your spending is non-essential and develop a mindset that will allow you to arrive at your final destination. When do you want to retire? How much money is enough for you to maintain a lifestyle that will satisfy you? These are very personal questions and the answers will be different for everyone.
Here are some important areas to address in order to make the next year financially positive.
Create a spending plan. Figure out your monthly capital, and then develop a method to save at least 10 percent of your take home pay. If you find this to be a challenge, see where you can cut back in order to meet the 10 percent target. This will help you build a constructive spending plan.
Develop your Financial Goals. Besides saving, you should also resolve to pay off high-interest credit cards as soon as you can. Once you do that, save three to six months of living expenses as a buffer against any emergency that may occur.
Build a portfolio. Prior to developing your basket of investments, know your risk tolerance. What stage of life are you in today? Perhaps you are more interested in preservation of capital than creating wealth. Are you taking an aggressive or conservative stance? Your answers should mirror your list of personal financial goals.
Get an education. Maybe this is the year you will finish your undergraduate degree or work to complete that graduate program you've been putting off. This will help you advance in your current career path or maybe assist you in getting a better paying position. You should also consider educating yourself in the various methods of investing in order to make some very critical decisions when it comes to building wealth for you and your family.
There are a number of personal fiscal decisions you'll need to make along the road to financial freedom. Will you use a broker or a financial advisor to help you get started or will you develop a more "do-it-yourself" approach to build wealth by using online discount brokers. Remember to use the 401(k) plan at work. January is normally one of the "open-season" months during the year, which allow you to jump in and take advantage of this valuable tool. Check with your human resources department to see if your company offers this type of investment opportunity and get involved today, especially if the company matches your contributions.
Make it a positive 2005! This time next year, you'll look at your monthly statement and see just how much your financial life has improved. That, my friend, is a very good thing!
Originally published in the Outspoken e-newsletter.