As I continue to build my financial future and coach clients on how to do the same, I want to share some insights on becoming wealthy that I’ve learned from the financial world, the personal development world, and the practical world. Some of these tips may be old news for you, but some may be new. Here are five tips to make sure you are heading in the right financial direction:
1) Set Financial Goals that Inspire You
I was on the train on my way into Boston recently and I overheard a college student sitting next to me telling her friend that she has no money. She said it in such an angry, depressed tone. She is working to pay her cell phone bill and make her car payments, and all the money she earns goes towards those two items.
Her frustration is certainly understandable, but her financial situation may be fine for now. She is at an age where she has very few expenses, and she has many years to build financial success. However, I wonder what her response would have been if I had asked her how much money she would like to be making? Would she have a clear answer or just tell me that she wants more than she is earning now. What would she say if I asked her how much money she would like to have saved in five years? In ten years? When will she be buying her first home? How much money does she want to have saved before she retires?
Most college students probably don’t have answers to these types of questions, and many mid-career professionals probably don’t either. Why not? And what are you missing if you haven’t thought about these questions? If you have financial goals that inspire you to take action, then you will begin to look at money and the world in a different way.
Set goals that inspire you and will start to become more aware of the opportunities out there that will help you fulfill those goals.
2) Know Your Budget
I am always surprised at the number of people I speak with who do not know what it costs them to live their current or desired lifestyle. By knowing how much money you spend and what you spend it on you can become clearer on how much you should be saving and where there might be an opportunity to cut costs. Also this awareness will help you stay out of financial trouble. If you combine the practical knowledge of what you spend with some exciting financial goals, your motivation to earn income, save money, and be successful will increase.
Call or email me if you would like to fill out a budget worksheet and/or have a free coaching call to see what I do to help clients in their financial part of life.
3) Set Up An Automatic Savings Account
One major stepping stone in achieving financial success is to set a goal to have enough money saved so that you can live your desired lifestyle off the interest or financial return from your savings and investments. One of the dangers of having no exciting financial goals and no budget is the lack of focus you will have on saving money. An easy way to save extra money is to set up an additional bank account that gets an automatic deposit each week from your main account. Even if you started by depositing only $5-$15 per week in that account, you would still get the chance to see it grow and you would be excited about saving more money. You should still do this even if you have debt to pay off. Instead of focusing on the money you are spending you will begin to shift your focus to the money you are saving. You will not miss the money you are saving because your lifestyle will automatically adjust to your saving that money instead of spending it.
Recently a friend sent me a great article about a woman who made a decision to save every $5 bill that came her way. Three years later she had accumulated $12,000! Here is the link to the article: http://www.boston.com/business/personalfinance/articles/2008/07/20/with_a_bit_of_creative_savings_5_can_get_you_at_least_12000/
4) Set Up An Automatic Debt Repayment Program
Remember, what you focus on expands. So if you have debt, DO NOT FOCUS ON IT. Even if you are focusing on GETTING RID OF DEBT, you are still thinking about how you HAVE DEBT.
So Zak, you might ask, how do I stop focusing on debt if I need to pay it off? A simple way to do that is to set up an automatic debt repayment program or to open another bank account (just like your extra savings account) that is dedicated to paying off loans, credit card debt, and any other debt you may have.
Debt is money that you borrowed from the future to pay for present or past expenses. Instead of looking at debt as debt, look at it as investments that you made earlier on in life to become who you are today, even if that investment was a piece of clothing or something that does not mean much to you now. At the time you bought it, it did mean something to you; otherwise you would not have borrowed from your future to pay for it. A mortgage is debt, but people call it a mortgage. It is money that we have borrowed from our future to pay for the present. We give it a new name and call it a mortgage. It would not be as fun to own a home if you constantly had to pay your “debt” off on it.
Begin to call your debt a more positive word so that IF you begin to focus on it you will associate positive energy with it and not negative energy. Maybe you begin to call your debt your “Financial Leverage Plan” or “Previous Investments for Success Account” or the “Fund That Has Made Me Who I Am Today.””. Pick a name that makes you laugh and that reminds you that everything you have spent money on so far in life has been an investment in creating who you are today. If you combine that with a plan to pay off your debt and start focus on savings, you will be on the right track.
5) Reward Yourself
Whatever you reward, gets reinforced. As you are building a successful financial future, make sure you are rewarding yourself along the way. If you have never made a budget and you create one, reward yourself for taking that step. If you set up an automatic savings program, reward yourself for taking that step. If you begin to call your debt a funny name that makes you think positively, then reward yourself.
A reward is simple. It does not have to cost any extra money. Just declare that whatever you do is a reward for taking a specific action. For example, maybe you always go to concerts or sporting events. Next time, instead of just spending the money on a ticket, make a commitment that you will not purchase another ticket without taking an action to improve your financial future. After taking that action, then purchase your ticket as a reward. Even simpler than that, you could just cook yourself a nice meal and declare it as a reward for taking a desired action.
As you begin or continue to build your financial future, keep these steps in mind. Remember, financial success, like all success, starts with clarity. Where do you want to be financially ten years from now?
Work To Grow
1) Make a budget (you can email me to get the sheet I use with clients)
2) Set up an automatic savings account
