4 Steps To Financial Strength

Focus On Simple And Achievable

Like anything worth having in life, achieving financial strength requires discipline and focus. However, many people are not taught about “practical” ways to improve your financial situation in school. You may have taken an economics course and learned about fancy concepts like Pareto optimality, but unless you are an economist or MBA, it is unlikely that you use those concepts in everyday life.

We want to help make it easier for you to become stronger financially, so we have put together a number of organized steps that will make it easier to actually USE and APPLY financial concepts to improve your financial strength.

Step 1

Make Better Decisions With Your Money

If you are like most people, than you have a limited amount of money, but lots of bills and dreams. One obvious step to take is to make better decisions with the money that you do have.

Don’t Spend More Than You Make
1. Generally, your household expenses shouldn’t exceed 33% of your income. Debt payments should not exceed 30%.
2. Buy only what you need. Ask yourself, “Do I really need it?” before buying.
Manage Your Debt
1. Credit cards make it easy to spend money you don’t have. Don’t use them unless you can pay off the balance every month.
2. Pay your bills on time. Remember that fees and interest can add up quickly.
3. If possible, consolidate debts for lower interest payments. Save the difference or pay down other debts.
Create An Emergency Fund
1. Set Short-Term, Mid-Term, and set aside enough money to get through 3-6 months of unemployment or major emergencies.
2. An emergency fund will help you get through tough times without getting into credit card debt.
Set Short-Term, Mid-Term, and Long-Term Financial Goals:
1. What Do You Want To Achieve…
  1. 6 Months From Now?
  2. 1 Year From Now?
  3. 10 Years From Now?
2. What Are You Willing To Do To Reach Those Goals?

Step 2

Protect Your Income And Family

Protecting Your Income And Protecting Your Assets Are Essential For Creating A Financially Stable Future.

When You Are Younger, You Need Protection For Your Income In The Unfortunate Case Of Your Death Or Disability. When You Are Older, You Need Protection For Your Retirement and Your Legacy To Your Family.

It’s important to have adequate insurance, especially for life, health, disability, personal liability, and coverage of property.

All it takes is one major hospitalization or accident to realize the importance of having adequate insurance!

Step 3

Accumulate Assets

The middle part of your life or career is often called the “accumulation phase”. This is because you are still establishing yourself financially and are (hopefully) growing and gathering assets rather than spending everything (which you would do at retirement).

When accumulating assets, you need to be aware of the concepts of the Rule of 72, Inflation, Taxes, and Market Risk.

Step 4

Preserve Your Legacy

Protect Your Hard Work And Sacrifice By Conserving, Planning, And Transferring Wealth During Your Lifetime. Failing To Plan Might Mean That Your Wealth Ends Up In The Wrong Hands.

To Preserve Your Legacy, You Should Pay Attention To:

Adequate Protection (Insurance Coverage)
Long-Term Care Costs
Power Of Attorney
Living Wills
Testamentary Wills
Forming Trusts Or Family Limited Partnerships For Major Assets