Rules for Financial Success

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Review relevant changes to tax legislation to ensure that all adjustments and deductions are maximized each year. Keep abreast of financial news and market developments and feel free to adjust your investment portfolio accordingly. Knowledge is also the best defense against scammers who exploit inexperienced investors to make money fast. Being financially independent means having enough income, savings or investment to live comfortably for a lifetime and fulfill all obligations without having to rely on a paycheck. This is the ultimate goal of a long-term financial plan. “It`s a much bigger issue than most people think,” says Spuds Powell, managing director of Kayne Anderson Rudnick Wealth Management in Los Angeles. “I`m always amazed at how often clients, even demanding ones, lack financial literacy.” Counsellors are increasingly stepping in to help, trying to fill a gaping gap in high school and college programs. Many see it as their responsibility to promote financial literacy on many fronts, whether it`s educational meetings for clients and their children, spreading the word through blog posts, or talking to groups in schools, credit unions and other organizations. The 50/30/20 budget rule, popularized by Senator Elizabeth Warren, is a guideline for achieving financial stability by dividing after-tax income into 3 categories of expenses: 50% for needs, 30% for needs and 20% for savings and debt repayment. We`ve developed an easy-to-understand budget calculator to help you categorize and control your spending and savings – which is the essential first step to financial freedom. Don`t overlook small, unnecessary expenses — they add up, says Brian Levitt, chief investment strategist at OppenheimerFunds and developer of a financial literacy program the firm launched last year to provide important lessons advisors can share with clients. Then, count down from your check-in date age to your current age and periodically set financial milestones between the two dates. Carefully write down all amounts and deadlines and place the target sheet at the beginning of your financial file.

Here are my five rules to simplify your path to financial success. They work for everyone, all the time. In my experience, those are the only things that work. If you decide to follow them, you may not become rich in 2011, but you will certainly position yourself to become rich in the future. Before you do anything else, identify your short-, medium- and long-term goals. It`s a simple exercise you can do with your feet off, but it creates the context and purpose of a financial plan and can prevent you from deviating from your trajectory and wasting your earnings,” says Doug Levasseur, National Financial Planning Specialist at BMO Wealth Management. The reason credit scores carry so much weight is that a person with reckless financial habits is likely to be considered reckless in other areas of life, such as not paying attention to their health — or even driving and drinking. What is the cause of this sinister data? Stagnant wages amid rising costs for health care, education, housing and other necessities have taken a heavy toll on people of all ages. But advisors point to a deeper problem: an almost universal lack of financial literacy. Once you understand the power of compound interest, you can estimate the huge opportunity cost of making mistakes early in your financial life, says Michael Finke, academic director of the American College of Financial Services, noting, “You can drag yourself all your life.” Poor health maintenance, on the other hand, has immediate and long-term negative effects on your financial goals. Some businesses have limited sick days, which means a loss of revenue once paid days run out.

Obesity and other nutritional diseases skyrocket insurance premiums, and poor health can force early retirement with a lower monthly income for the rest of your life. Do you remember the snowball effect? This can easily happen to your debt, and it can crush your financial goals. Think about what happens when you charge a new $1,500 laptop on a credit card that charges 18% interest. According to a Debt.org analysis, you`ll have to pay a minimum payment of $37 per month. If you only pay the minimum, it will take more than 13 years to pay off this purchase and will cost more than $3,200. These 12 steps won`t solve all your money problems, but they will help you develop the right habits that will put you on the path to financial freedom. Simply creating a plan with specific targets and deadlines strengthens your determination to reach your goal and protects you from the temptation to overspend. Once you start making real progress, relieving the constant pressure of escalating debt and the promise of a nest egg for retirement come into play as powerful motivators – and financial freedom is in your sights.

Not everyone has the luxury of being able to follow this kind of advice, and there are all sorts of reasons why people find themselves in unfortunate financial situations. “As a profession, we need to be the strongest advocates for financial literacy,” says R. Michael Parry, president of Liberty Wealth Advisors in Stamford, Connecticut, who blogs about the fundamentals of financial planning and helps Fairfield County, Connecticut, a chapter of the Financial Planning Association, organize educational events. The principle of proper care also applies to your body – and excellent care of your physical health also has a significant positive impact on your financial health. Do you want to improve your gambling quickly? Good news. Financial success doesn`t require financial close – or Herculean effort. It really comes down to a few simple rules. Corrections and reinforcements In an earlier version of this article, the CFA designation was erroneously referred to as a Certified Financial Advisor.

It stands for Chartered Financial Analyst.