5 Secrets of Financial Success
People with strong financial literacy have, on average, more assets than those with weak financial literacy. Financial literacy is the ability to understand how money works and how to manage it. Here are some top five ways to stay on top of your financial game.
- Pay Yourself First. My grandfather taught me at an early age that regardless of how much money you make or don’t make – you should always pay yourself before you pay your bills. Most people think about paying their bills, mortgage or rent and credit card debt before they pay themselves. Paying yourself first means that you put aside a certain amount each month towards your retirement account. Whether that account is your 401K, 403B or other retirement savings, financially literate adults pay themselves first. They learn to live on the remains. What you have left over is what you learn to budget on for the remainder of your bills and expenditures. Often, we spend what we have so if you’ve already spent it on your retirement account, then you won’t spend it on that new pair of shoes or that new tie you were looking at.
- Have a Trustworthy Financial Advisor. It’s important to find a financial advisor that you trust. You should interview several people in different financial firms to see whom you’re most comfortable with. Find someone who treats you as an individual not someone who would advise you like they do every other client regardless of their circumstances. Good financial advice that’s individualized for you is priceless. Be honest with your financial advisor and be realistic about your expectations, needs and desires.
- Be Careful About Loaning Money to Family. We want to help our children. Resist the urge to loan money unless you have a written and signed contract with explicit terms of the loan. It’s one thing to be able to help our children financially. It’s a whole other matter when loaning money. Consult an attorney or your financial advisor to understand how it will impact your finances before agreeing to any loans or co-signing any loans.
- Plan for Your Future. It’s important to plan for your financial future with realistic expectations and goals. As you move forward in your career, consider maxing out your 401k contributions and be sure to match anything your employer kicks in. Walking away from free money is silly. For many, it’s hard to think about aging into our 60’s, 70’s or even 90’s. But the reality is, that we are all living longer and need to plan far into our future. And if you’re already in your retirement age – it’s never too late to save or plan for the last stage of your life.
- Minimize Credit Card Debt. A good idea is to think that if you cannot make the purchase with your debit card or cash, then perhaps you should think twice and take a day or two before making the purchase. The average consumer (U.S., Canadian, European, etc.) credit card debt is anywhere between $3,600 and $17,000 depending on what source you check. Credit card debt can get out of control if you don’t get a handle on your card purchases. The average credit card charges between 13 – 21% interest rate on purchases that are not paid off immediately. A simple purchase (ex: 4 car tires) that would have cost $500 total may end up costing well over $1,200 before that purchase is paid off with the accrued interest. A good idea is to pay off your credit card balance each month if you do make a purchase.
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