Financial Goals, Financial Tips

Who Are You Listening To?

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When you get a new idea, or tip, or financial or business recommendation, is your first reaction fear and skepticism, or enthusiasm and excitement? If your answer is excitement, then the idea is something that resonates with some part of your goals, values or priorities. Maybe you want to be excited, but a voice in your head is telling you that you have never done that before – be careful, you don’t want to get ‘burned’. Maybe the voice is actually someone you know – like a close friend or family member.

What do you do when faced with a new idea that could help you financially, and you have to sort through the emotions to make a decision? There are obviously lots of layers and issues to sift through, so the place to start is with a paper and pen. Get it all in writing: your goals, fears and excitement – these are the issues that the idea is intended to help. Treat the decision with the respect any good business decision does, and document the facts and the questions until you have sequentially, strategically and systematically compared and analyzed the idea as it relates to what is important in your life.

Financial Tips

Break it Down

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Money topics tend to speak in terms of absolute numbers such as a $250k mortgage or 8% return, or a portfolio of $500k. It is helpful to break down the numbers into a monthly figure so they are relatable to day-to-day cash flow requirements.

When you are making a financial transaction, always consider what the monthly income will be from the investment − either while the money is invested or when you plan to access it. Likewise, consider what amount of income is required to maintain a loan, or was required to earn the money you are investing or paying out. The key is to ask yourself or your advisor to connect your transactions to an income variable for both today and the future.

Financial Tips, Lifestyle

What Can You Do?

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Never say “can’t”, especially in the context of, “can’t afford it”. Instead say, “How can I…?” It’s never about the money. It’s about what money can or cannot do for you. Understand why money is an issue in your life, either positively or negatively, and what is really important beyond the dollars and cents.

Why? It’s amazing to me how many times and ways we stop ourselves before we even start.  I spoke with someone the other day who was looking for work in her field. She started off saying she couldn’t live where she was living because the jobs did not give her enough income. We talked and replaced her “couldn’t afford it” reality with “how can she earn the dollars she needs working in her field so she can live where she wants”.

Financial Tips, Lifestyle

The Importance of Giving

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Giving is as important as saving. Even if you think you don’t have enough money to give, we all have people and causes that are important to us. Allocating an amount of money from every earned dollar for giving – as well as saving– needs to be established immediately even if you don’t know how it will work with your current cash flow or income situation. You can decide to hold off with the gift or  save the money only for a short while until it’s needed (like the end of the month), but if you wait until you have $100,000 in order to give $10,000, it won’t happen. You must set aside $1 from the $10 earned to develop the habit.

When do you start saving and giving? Developing wealthy habits doesn’t happen overnight. Start with your children: when they earn $10, put aside $1 towards long-term savings and $1 that they can use for giving. For yourself, start the next time you earn any money. Transfer 10% into savings and withdraw 10% for giving. If you get to the end of the month and you need some for your already – established expenses, transfer what you need from savings and if necessary deposit the “giving money” back into your account. After a while, you will have established the habit of allocating money and you’ll eventually find that you don’t need all of what you have set aside for your current expenses, and it will indeed be money you have saved and are able to give away.

Lifestyle

Your Ideal Lifestyle

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Your ideal lifestyle must have a dollar figure attached to it. It’s not okay to say, “I want to be rich” or “I want to be comfortable” or “I want to own a house” or “I want to travel”, etc. Your ideal lifestyle must have a price tag in a monthly amount. If you want to live in a certain house, how much will it cost to own and maintain? How much would you need to set aside for annual holidays, for someone to clean your house, for you to drive the car you want, to wear the clothes you like to wear, to give money away, to do the things you like to do, etc.

How? Start shopping – not to buy – but to do research, to become informed. Go to open houses, visit travel agents, sit in cars, look in stores you wouldn’t normally shop in, research charities, go online, talk to people, go places, write notes, keep files, and do what any informed buyer would do. If you have an idea to take a year off with your family and live in a foreign land, then find out the cost. Find out who and how you’ll have things looked after at home, where you’ll go, where you’ll live, and all the prices if you were to do it today. Even if you think you won’t live out your vision for five to ten years, you can find out the costs today then update your figures later, or learn to apply financial math calculations to project likely increases. You need to know the price of your dream, of your desired lifestyle, of your life outside of your current working and income situation otherwise, you’re giving up control and working with “averages” at best. Is your life just average, or is your life unique and personal? This is not a hard step unless you make it about lack, regret, fear, and self pity. This is about making it happen. Without this step, even if you won a lottery, you wouldn’t know how to use the money. Enjoy this process. It’s far easier than living a life of “coulda, shoulda and woulda”.

Lifestyle

Planning Your Ideal Budget

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Developing a budget does not mean adding up the total income you have to work with each month, then allocating funds within that level. The definition is: “planned expenditures and a program for financing them.” Figure out what you want to spend each month in order to live the life you desire while maintaining your true priorities, then look for ways to fund this budget.

Why? You might not know how you’ll earn the income that you’d like for your ideal budget when you first make it, but you’ll also never find out if you don’t start asking. Your option is to continue to scrimp and deny yourself the lifestyle you’d like to live and end up looking back on your life with regret. You might also find that when you make your ideal budget, it isn’t really as far off as you had imagined before you put it on paper in black and white.

Financial Goals, Financial Tips

Write it Down!

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The idea of putting either your existing financial situation, or your desired future on paper can be fearful, yet this is the only way you can properly plan. It is not enough to “guestimate” the expenses. You must know exactly what you are spending each month in order to do any future planning as well as to be able to make informed decisions about your current financial situation. The exercise of gathering this information is not to judge the spending, rather, it is simply research required to help you become more informed and more in control.
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Retirement

The Mortgage or the Retirement Account?

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One of the worst financial plans you can have is one that only asks the question, “Is it better to pay down your mortgage or contribute to your retirement fund?” If you have a home and a government-regulated savings plan, you will be required to either pay tax or interest when you want access to the money. At the very least, you need to have some savings or investments that are accessible without any restrictions in addition to your home and your retirement fund.

Because if you are saving for the long-term, you need to think long-term. There are many different ways to save for the future – one is inside a government-sponsored retirement plan, and others are to establish your own savings programs in such things as real estate (besides your home), non-retirement plan investments, insurance, mortgages, businesses, etc.

Financial Goals, Financial Tips, Sources of Income

What Are Your Sources of Income?

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Within a household, you need to have multiple sources of income as well as multiple assets to build true financial security. If both income earners work for the same company or in the same industry, there is very little security in that.

How can you minimize this risk? Like investing, where one risk minimization strategy is to diversify among industries, type of investment, return, etc., the same is true for income within a family. For planning purposes, it’s best to have income into your home from different industries, different types of income (such as employment, self-employed, business, or investment), different payment frequency, etc. This way you cover your risk of income loss. Ideally you will want to ensure you have income that will continue regardless of whether or not you work to receive it. For example: investment income, royalty income, disability insurance, etc.

Financial Tips, Lifestyle

Change Your Thinking

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Look for ways to do something rather than ways not to do something. For example, rather than looking for ways to decrease spending, first look for ways to earn the money. This is more inspiring and will often result in the reduction of spending. Thinking positively and having a “bigger” goal produces a bigger purpose which will likely end up in a shift in spending anyway.

How? Rather than looking at the situation and saying “can’t because,” or “if only,” or “…but…” keep asking, “Who? What? When? Where? How?”. Keep asking and asking. As soon as you say “can’t”, you stop looking for answers.

Encouraging & Empowering Financial Possibilities