- Write down your financial goals. Writing down your financial goals gives you a 70% greater chance of achieving them. Your goals must be specific and complete with a “deadline and dollar sign”. What do you want? When do you want it? How much will it cost? Taking the time to think comprehensively about your goals also helps you to understand and internalize your priorities. A strong sense of priority, deeply rooted in your goals, will help you stay focused over time.
- Develop strong budgeting skills to stretch your financial resources. Wealth is built by saving and investing over time. It is just that simple. Unfortunately, many people find it difficult to save and, at the same-time, maintain their lifestyle. The key is in finding a way to do more with less. A strategic budget is really a spending plan. It is designed to help you make your financial life work on paper including your cost of living and your savings objectives. If you can make your life work on paper, you can make it work in real life. Conversely, if it does not work on paper then it will not work in real life no matter how hard you try. Use your budgeting skills to stretch your dollars as far as possible.
- Avoid consumer debt. Consumer debt generally carries high interest rates. The consumer goods you purchase: electronics, clothing, and entertainment, tends to fall much faster in value than the debt used to buy them. What remains is stubbornly high levels of expensive debt with little or no asset value to show for it. This tends to destroy your net-worth which is the opposite of building wealth. Those high interest rates you are paying is actually helping someone else build wealth. Get out of debt.
- Pay yourself first. This does not mean treat yourself to a trip to Club Med. It means saving for retirement. Retirement is more expensive than you realize. Plan to save 13% to 15% of your gross income for retirement. Start as early in life as possible. Master the art of budgeting so that you can live without the money you are saving. Don’t touch your saving until retirement.
- Use stocks to leverage your long-term savings into wealth. Stocks are the investment of choice for long-term investment goals like retirement. That’s because stocks, as an asset class, offers higher returns over time than most other investments. While stocks do offer a considerable amount of volatility on a day-to-day basis, the asset class is consistent in its ability to generate higher returns over time. Use a broad-based, diversified, portfolio of large and small companies, from around the world for the equity portion of your long-term savings.
Financial empowerment is about taking steps to get control of a key financial areas of your life so that you can build sustainable wealth over time. The goal is to enjoy life and build wealth. You can do both but, you need a plan and the discipline to stick with it.
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Keith Donnell is a Certified Financial Planner Professional and a Registered Investment Advisor in Pennsylvania with 30 years of experience helping people plan financial for major life events such as retirement and more. He can be reached at: