One of the most common questions I receive on a monthly basis from friends, family, and acquaintances is, “how do I gain control of my financial life?” When asked on the spot, it’s incredibly difficult to answer. There are so many questions I need to ask them first before I can give a concise answer – and even then, I still need to bring them in for a sit down.
Gain control of your financial life
I’ve decided to compile a list of the 13 strategies needed to take control of your financial life. Now, whenever I’m asked the question, I refer them to this list before I have a sit down.
1. Create a priority list: What’s the most important goal you need to accomplish? List that goal at the top of your list. Is it to remove all debt? Send your child to college? Whatever it is, list your priorities in order from highest to lowest. There are even a number of iPhone apps that will allow you to do just this.
2. Set a budget: You know, I can’t believe this is on my list, because it is so simple and so important. Frankly, I’m astonished when people approach me with financial advice, and when I ask if they’ve created a budget to meet their priorities, they respond with, “I haven’t had the time.” If you don’t have the time to set a budget now, when are you? Set a realistic budget, and stick to it. Track every penny.
3. Invest and diversify: Choose an asset class to invest money into – whether it be securities, real estate, etc. I suggest you properly diversify your investments not only across asset classes, but within asset classes as well.
4. Take control of your debt: It’s tempting to use a credit card with the “receive now, pay later” mentality in mind, but you must erase this mentality if you’re planning on becoming financially independent. Find who you owe money to, and focus on saving money in order to pay off those debts. Nothing feels better than being debt-free.
5. College savings: If you have a child, do them the benefit of sending them to college. Begin saving now, so you take some of the burden off them in terms of loans later in their life.
6. Teach your kids the value of the dollar: If you’re reading this article, chances are you wish to become financially independent. Do you want your children to be reading this same article, in the same situation as you 20-40 years from now? Teach them the value of the dollar.
7. Retirement planning: Start saving now. Retirement should be enjoyable, and come earlier in life rather than later. Money makes retirement enjoyable, so save with the thought in mind, “I’m delaying my fun now so my future self can enjoy this money.”
8. Diversified assets: Somewhat similar to tip #3, but focus on understanding how & why you should be diversified. Owning shares of Target, Abercrombie, and KMart is not diversified.
9. Hire an adviser: They’ve spent years of their lives learning to plan your finances. Find a good one who is trustworthy and knowledgeable, and hire them.
10. Manage your taxes: Do them right, and either use a tax software such as TurboTax, or hire a tax professional to help you.
11. Family finance planner: You’re not just taking control of your own financial life, but the financial lives of your family as well. Make sure everyone is on board with you.
12. Estate planning and asset protection: Hire a professional to create a plan for after your gone. Protect your estate as well as your assets.
13. Entrepreneur route: Have a passion for a niche, or do you see entrepreneurial opportunity in your workplace? Hammer out a business plan and see if this is something that can be done as side-work until you’re ready to take on your own business full-time.
Hopefully you’ve taken something from the list, and will take action on it. It may seem daunting at first, especially if you’re in dire straits, but the road to financial independence is a long one, and one that requires dedication and hard work. Start now.