Everybody wants to achieve financial success. Financial success brings a great sense of security and peace of mind. However, as much as everybody wants to achieve financial success, only a very few make it.
Financial success means achieving financial security and independence. Financial security and independence means that you will no longer worry about your finances because you’ve established it very well. Building a financial foundation is just like building a house. If you’ve built a house out of sturdy materials and have done it right, you won’t worry about problems from small ones such as leaks to great ones such as losing your roof during typhoons. If you’ve built it weak, you have all the reasons to worry. The same can be said about financial planning. If you’ve built your financial foundation just right, there is nothing to worry about.
Building a strong financial foundation is the key in achieving financial success but what does it really take to have a strong financial foundation? Here’s a rundown.
1.) Assess your current finances and assess your financial goals. Knowing where you are right now and where would you want to go financially is very important. If you don’t know where to start and where you’re heading, you’ll definitely lose your way and you can’t build your financial foundation the right way. Knowing your current finances can make you see which things must you adjust in order to become more efficient and knowing setting goals will make you see things more clearly.
2.) Know and apply the steps in building the right financial foundation. Just like in building a house, building the right and solid financial foundation takes some steps as well. If you’re still young and still starting out, you must invest reasonably on health care and insurance. The reason why health care and insurance must be given a high priority is because getting sick is very costly and just in case something will happen to you, those who are left behind can get some financial support. Next is to eliminate debt and to increase your savings or emergency fund. This is the time wherein your start to accumulate wealth. The last step is to invest. Investments are intended for long term thus they must come last. You can invest for your children’s education if they are still at least a decade away or simply for your retirement fund. Keep in mind that investments are for long term thus they must not be withdrawn during emergencies. That’s what emergency funds are for.
3.) Get to know your priorities. Once you have assessed your current financial situation, set some financial goals, and knew the steps on establishing the right financial foundation, it’s time for you to list down the things that you must prioritize. Prioritize things in this order: Health care, insurance, debt elimination, savings/emergency fund, investments, and estate protection. If you have existing health care, jump to the next which is insurance. However, if you have an existing investment, don’t pull it out but rather, prioritize health care or insurance or paying off your debt first and let it grow while you’re realigning your financial foundation.
4.) Create a budget and stick to it. A budget is simply a reminder of your goals. Create a budget for short term use and another one for long term use. Short term use include things such as groceries, recurring bills, and daily expenses. Long term budget include savings for a new house and lot, a new car, or even monthly contributions to your investments. Create a budget in line with your goal and not simply to please you. Put your priorities on top of the list and only move to the next once you’ve accomplished the preceding ones.
5.) Record your expenses. Getting to know where your money is really heading is very important. There will be times wherein you’ll fail to follow your budget thus keeping track of your expenses will make you trace where your money has really been going. It can also make you come up with things in order to make up for such mishaps along the way that made you fail to follow your budget. Compare your past and present expenses and see if you’re improving.
The keys in achieving financial success are just discipline and knowledge. If you have or will develop discipline, creating and following a budget will be very easy and if you have the knowledge, you’ll know which things must you prioritize in order to result in very significant gains. Invest in knowledge by reading books and articles online and develop your discipline by gradually eliminating the things that aren’t important in your list. Lack of discipline and knowledge will sabotage your chances of achieving financial success.