A Guide to Financial Success
You can achieve Financial Security no matter what your income level is, you always have a choice to change your life and get on the path to Financial Independence.
"It's not how much you earn,
but how much you save."
Here are guides to achieving Financial Security:
Pay Yourself First
Paying yourself first not only gives you the opportunity for self-respect but also allows your family to experience financial security. This means putting your own needs and those of others before all other demands on money.
Treat your savings like any other recurring bill that you must pay each month. Dedicate the appropriate amount from your paycheck and set it aside.
First, set up an automatic payment from every paycheck into a savings account that's separate from bills or other debts like credit cards and student loans.
To have a complete savings program, most people need these
“three types of basic accounts:”
1. Emergency Fund - This is your reserve fund in the event of an unforeseen emergency, job loss, or an unexpected expense. A good rule of thumb: Set a goal of having three to six months’ salary in your emergency fund.
2. Short-Term Savings - This account is for money that you set aside for expenses you want to purchase within a short-term time frame. For example, here is where you would save for a new computer or perhaps a vacation.
3. Long-Term Savings and Investments - This is where your retirement savings, college fund, and other long-range savings will go. Because these savings have more of a long-term time horizon, you can use investment vehicles with the potential for a higher rate of return, such as equity mutual funds.
Use Time and Consistency
"It pays to start investing early."
If you want to be financially independent, you have no choice — you must start now, or later you must save more. If you wait to begin saving, you must save much more.
One thing is certain: You can’t afford the high cost of waiting.
Pay off Debt
Before you start repaying debt, take a moment to identify the kind of loan that is owed- whether it be credit card payments or mortgage bills. More information about your situation and financial obligations in this area will help come up with an effective repayment plan tailored just for you.
Ways to pay off debt:
Create a focused budget
Pay off the most expensive debt first
Pay more than the minimum balance if possible
Discipline your credit card spending
Have the mindset of “Needs vs. Wants”
Avoid returning to bad habits when you reach your goal
Consider debt consolidation
Change your habits in “Savings vs. Spending”
Increase your income with a side hustle
Buy the Right Kind of Life Insurance
The Importance of Life Insurance:
Life Insurance, in its most basic form, is an investment for your future. It is the best way to protect your family and it acts as an income substitute when one becomes unable to work due to uncertain death, circumstances outside his/her control such as illness or injury/accident.
What should you buy:
Inexpensive term life insurance is a great way to protect your family in case something happens. A common misconception about life insurance is that it is a permanent need for each family. Most financial experts see it as just buying time until you accumulate savings or other assets.
Invest with Professional Management
What is a Mutual Fund?
A mutual fund is an opportunity to invest with many other investors in a pool of money managed by professionals. The "pool" consists of your behalf, so you don't have to worry about managing it yourself. Professional managers use their knowledge and experience for different companies within various industries while always keeping an eye out for market conditions because they know how quickly things change over time.
The Three “Ds” of Investing
Dollar-Cost Averaging
Dollar-cost averaging means investing a certain fixed amount each month, regardless of what’s happening in the stock market. This eliminates having to predict when to invest as you will be able to take advantage of the market highs and lows.
Discipline
Staying committed to your goals is the key to success. Be mindful of the long-term potential in your investments. The key is to maintain a long-term view and stay focused on your goals
Diversification
Build your portfolio by balancing a variety of investments. Together, these investments help you achieve your goals and reduce your portfolio’s risk.
