“We tend to focus on assets and forget about debts. Financial security requires facing up to the big picture: assets minus debts.” – Suze Orman
Being financially secured takes more than saving every penny you earn. For the average person, the world of investments and capital is believed to be rigged, turbulent and too sketchy for them to invest their hard earned money. Although I understand why most people may be fearful, I also know that if you want to live a life in the lap of luxury, you must create opportunities for yourself, save, invest wisely, and protect your assets.
To help you on this tumultuous journey, here are 5 tips to guide you on the road to financial security:
Getting Opportunity to Knock on Your Door:
The first step toward financial security begins with learning. Study up on anything related to finance, such as interest rates, taxes, dividends, investing, compound interest and saving. Besides reading books and articles on finance, you could also take a class on entrepreneurship that’ll help you identify market and consumer needs and create businesses around those needs. I’m not asking that you read any junk that will do more harm than good. Instead, learn from the best and from those who have already achieved success.
Behave and Save:
We’ve all heard of the old adage that “it takes money to make money.” There’s some truth behind this statement. Rather than taking out a loan where you’re also paying interest on top of the money borrowed, it’s best that you start saving immediately for investing purposes. Decide how much money out of your paycheck that you could save and put that money in a savings account to earn interest until you finalize on your investments. Even saving as little as $50 per paycheck will amount to quite a bit over the years and if you decide to put that money into a high-risk investment, then you’re only risking what you could afford to lose.
Don’t Be Kept in Debt:
Paying off your debts, especially your credit cards, is an essential part of financial freedom. As of 2014, it is said that the average credit card debt per U.S. household is $15,191 which equates to $854.2 billion. Remember, it’s difficult to get ahead in life if you already have debts hanging over your head. So do your best to pay off all your debts as soon as possible.
The Future is in Your Plans:
Everyone must plan for the future and it’s best to start early since time is our most valuable asset. Start by creating a 1 year plan, a 5 year plan, and a 10 year plan. Begin by calculating a conservative estimate of how much money your household needs to save over the years in an effort to reach your financial goals. Depending on the amount, decide what’s the best use of those funds, whether it’s starting a business, investing, or simply allowing the money to continue collecting interest.
As with any goal, the key is to ensure that your ideas stay in the forefront of your mind by not only writing them down but also referring back to them frequently. To do so effectively, you should place your financial plans somewhere you visit regularly, such as the dashboard of your car, refrigerator, or even your bathroom mirror.
Invest, Invest, Invest!!!
As you can tell, I’m very adamant about investing. If you’re not already doing it, I highly recommend using a variety of investment vehicles as part of your diversified retirement plan.
Here are some to consider:
Sign up for your employer’s 401K plan, and at minimum, contribute enough to get the company’s match since it’s free money.
Individual Retirement Account (IRA):
Available from most financial institutions, everyone should have either a Roth, or traditional, IRA account in conjunction with their 401K plan. By doing so, you’ll also accrue interest on your savings and you could decide on the amount of risk in your investments. Make sure you do research on the minimum amount, if any, to get started, along with fees, commissions, taxes, etc.
Money Market Accounts (MMA’s):
MMAs typically have a higher minimum compared to a regular savings account but accrues interest at twice as fast. The downside is that your ability to draw on those funds and affect its investments are limited.
If you want to grow your fortune, you should definitely consider the stock market. Begin by doing market research since you should always understand which stocks you invest in, and start small with money you could afford to lose.
Another common way to amass wealth is by investing in real estate since property values generally appreciate over time. You could choose to rent the property, flip it, or develop it for commercial use.
For those unaware, bonds are basically debt securities, similar to an I.O.U., where you lend money to the government, federal agencies, or any other issuer. And in return for your money, the issuer gives you a bond as a promise to not only pay back the loan but also a specified interest rate during the life of the bond when it matures.
At the end of the day, you should never keep all your eggs in one basket. Through diversification, and by investing in stocks, real estate, MMAs, bonds and mutual funds, you’ll ensure that your money can withstand the fluctuations in global economies.
To end, I’ll leave you with another quote from Suze Orman…”time is key to building your financial security.” So start early, pay off your debts, save, invest wisely, and let your time and money work for you!