I'd recommend setting up a system that works best for you and your family.
Just writing down your goals will help you start the process. But, reviewing them daily and having honest conversations about where you are financially will determine your success or failure in becoming financially free. Never let excuses stand in the way of saving money. It's a long-term goal that starts today — and never stops. If you have been living paycheck-to-paycheck up to this point, your first savings goal should be to create a safety net. You can do that by creating an emergency fund. An emergency fund should be held in a perfectly safe account — like a savings account, money market account, or a short-term certificate of deposit.
It's not for investment, because investment involves risk, and that's not the purpose of an emergency fund. Your first goal should be to accumulate a sufficient amount of cash in the account to cover 30 days worth of living expenses. Once that's achieved, your goal should be to add another 30 days worth of living expenses. The account should have between three months and six months of living expenses if you're a salaried employee, and between 6 and 12 months if you have a self-employed job or paid entirely by commissions.
2. You Don’t Lose Sleep Over Finances
Life is full of surprises and changes, and it will do you a lot of good to have a liquid stash of cash you can access quickly in case of an emergency. Do you want to be up a creek without a paddle when those situations occur? The goal is to make smart choices by planning ahead. No emergency fund - no flexibility to call your own shots. Once your emergency fund is adequately stocked, you can begin thinking about investing your money. This is important, because investing is about using your money to earn more money. The larger your investment portfolio becomes, the closer you get to financial independence.
Ideally, your efforts to save money should never slow down once you have built your emergency fund. Instead, increase your efforts to fund your investment accounts. That should be easier to do once you have an emergency fund in place.
How to Become Financially Secure
In hindsight, it's obvious there have been better times to invest than others. But since no one knows what the future holds, you can't know when that will be in the future. Plan to invest no matter what the market is doing. If you're investing periodically, you'll be dollar cost averaging into the market, which will minimize the risk you're taking should the market decline.
If you do feel it's a bad time to invest, then simply cut back on how much you are investing in equities. But at the same time, continue accumulating cash and fixed income investments in your portfolio, that way it'll be there to buy when the timing looks little bit more favorable. This gets back to not knowing what the markets will do in the future. The best way to protect yourself against unexpected surprises is to diversify your investments across several different asset classes.
Big picture, you should have a certain amount of money invested stocks, fixed income investments, peer to peer lending , cash, natural resources, and real estate. That will keep you from taking a big hit in the event any of those sectors crashes, while at the same time taking advantage of strong markets wherever they may be. Also, don't get crazy with your investments. Stick with index funds for stocks, since they have lower investment fees and don't generate a whole lot of capital gains taxes.
Keep your real estate investments in real estate investment trusts REITs , which are actually something like real estate portfolios themselves. Just as you would diversify your investment portfolio, you should also diversify how you make money. Both the economy and the job market are not as stable as they were a couple of decades ago, and you have to be prepared to ride out the ups and downs. For example, if you have a full-time job, work on creating a side business. Not only will it provide you with an additional source of income for savings and debt reduction, but it may also form the replacement for the job you lose in the next recession.
If you have a business, look to diversify into related sources of income. You may even consider creating passive income sources, such as being an investor in a small business that is run by someone else. Multiple income sources, in and of themselves, can represent a form of financial independence all by themselves. Taxes represent a major reduction in your income, that means you will have less money available to save, invest, and pay off debt.
By using strategies that reduce income taxes, you'll be able to keep more of your income, rather than turning it over to the tax authorities. The easiest and best way to shield your income from taxes is retirement plans.
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If your employer offers a k plan at work, put as much of your income into it as you can afford. A family?
10 Steps to Financial Security Before Age 30
A new car? A much-needed vacation? Put everything in perspective, and give yourself something to work for, by creating a vision board, which you can fill with images and words to illustrate your ideal life. Stores employ a ton of tricks to try to seduce us into buying more than we intended. Your power to grow your money, that is. We calculated that here. Calculated here. No worries. Just read this. Those with the highest interest rates grow fastest, so focus on the most toxic debts first.
How do you know which those are? We created a whole model for you to spell it out. Check it out here. But forget averages and think about yourself: Many experts attribute that gap, at least in part, to the fact that women tend to ask for less and negotiate less than their male counterparts. We know how it goes: It starts with a small spending gaffe. You need to keep your eye on the ball at all times. That's because it's one thing to create a budget and set financial goals, but entirely another to stick to them.
So set aside minutes each week or fortnight to make sure you're keeping on track. This regular review is also a good opportunity to identify any expenses you don't really need.
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- Second, Make Things Safe!
Your streamlined bank accounts should make this very simple to track your progress. Remember how good that feels! Ask yourself how quickly your family would burn through your savings if you were unable to work for three to five months? Or even longer? The best bit is that these can be tailored to your individual needs, and by requesting a quote you can determine how they could fit within your budget.
The ultimate guide to becoming financially stable
Financial Advisers can provide you with an amazing amount of support with your personal finances. Here are some ways you can get the most from your Financial Adviser with ongoing support. A relationship with a financial adviser is ongoing — not a case of set and forget. Today we'll look at when you should review your financial plan with your adviser. The productivity commission has released a report into the superannuation industry and made 31 recommendations for reform.