Like anything worth having in life, achieving financial strength requires discipline and focus. However, many people are not taught about practical ways to improve their financial situation in school. You may have taken an economics course and learned about fancy concepts like Pareto efficiency but, unless you’re an economist or MBA, it’s unlikely that you use those concepts in everyday life.
We want to help make it easier for you to become stronger financially, so we have put together a number of organized steps that will make it easier to actually USE and APPLY financial concepts to improve your financial strength.
Manage Your Money Wisely
- Don’t spend more money than you make.
- Manage your debt.
- Create an emergency fund.
- Set financial goals.
Protect Your Income and Your Family
Protecting your income and protecting your assets are key ingredients for creating a stable financial future.
- The impact of inflation
- The power of compound interest
- The effect of taxes
- The consequences of risk
Preserve Your Legacy
Creating a valuable estate can take a lifetime of effort. Protect that hard work with a plan to conserve and transfer wealth during your lifetime. Make sure your legacy does not end up in the wrong hands.
Step 1 - Manage Your Money Wisely
If you are like most people you have a limited amount of money, but lots of bills and dreams. One obvious step to take is to make better decisions with the money that you do have.
There are several ways to make better decisions with money:
- Don’t Spend More Than You Make
- Generally, your household expenses shouldn’t exceed 33% of your income. Debt payments should not exceed 30%.
- Buy only what you need. Ask yourself, “Do I really need it?” before buying.
- Manage Your Debt
- Credit cards make it easy to spend money you don’t have. Don’t use them unless you can pay off the balance every month.
- Pay your bills on time. Remember that fees and interest can add up quickly.
- If possible, consolidate debts for lower interest payments. Save the difference or pay down other debts.
- Create An Emergency Fund
- Set aside enough money to get through 3-6 months of unemployment or major emergencies.
- An emergency fund will help you get through tough times without getting into credit card debt.
- Set Short-Term, Mid-Term, and Long-Term Financial Goals
- What do you want to achieve:
- Six months from now?
- One year from now?
- Ten years from now?
- What are you willing to do to reach those goals?
- What do you want to achieve:
Step 2 - Protect Your Income and Family
Protecting your income and protecting your assets are essential for creating a financially stable future. When you are younger, you need protection for your income in the unfortunate case of your death or disability. When you’re older, you need protection for your retirement and your legacy to your family.
It’s important to have adequate insurance, especially for life, health, disability, personal liability, and coverage of property.
All it takes is one major hospitalization or accident to realize the importance of having adequate insurance!
Step 3 - Accumulate Assets
The middle part of your life or career is often called the accumulation phase. This is because you are still establishing yourself financially and are (hopefully) growing and gathering assets rather than spending everything (which you would do at retirement).
When accumulating assets, there are some basics concepts that can help you during the process.
Learn more about The Rule of 72.
Learn more about Inflation.
Learn more about Taxes.
Learn more about Risk.
Step 4 - Preserve Your Legacy
Creating a valuable estate can take a lifetime of effort. Protect your hard work and sacrifice by conserving, planning and transferring wealth during your lifetime. Failing to plan might mean that your wealth ends up in the wrong hands.
To protect your legacy, you should pay attention to:
- Adequate protection (insurance coverage)
- Long-term care costs
- Power of attorney
- Living wills
- Testamentary wills
- Forming trusts or family limited partnerships for major assets
Please note: The material on this website is intended for informational purposes only. Neither Tranont Life nor its affiliate companies authorize its agents, employees or representatives to give legal, tax or accounting advice. Please consult the appropriate professional for legal, tax or accounting advice.