Keys to Financial Success

For many Americans having a more secure financial future and living a healthier lifestyle are important goals they would like to achieve. It’s easy to see how the two often go hand in hand. Most of us need to work in order to provide for our families and build financial security and having good health makes it possible to enjoy our financial success.

Despite what we hear from the news media and advertising industry, reaching these goals is not complicated. It simply requires common sense, a sensible plan, and the commitment to stick with it. Here are some of the key principles for building a more secure financial future and improving your health so you can enjoy it.

Get organized. Start by organizing your personal and financial records so you and your family can quickly access important tax, insurance, investment, estate, and other documents. The most effective system is one that is easy to access and use and maintain, so keep it simple. Being able to easily find the documents you need saves time, money and most importantly unnecessary stress.

Next, find out where you stand today, financially by constructing a cash flow and net worth statement. They will serve as the foundation of your financial plan and will help you make better financial decisions in every area of your life. The cash flow statement shows how much you earn and spend and how you earn and spend it, enabling you to identify what needs to be done to generate the savings that you’ll need to reach your goals. The net worth statement is a summary of what you own and what you owe. When used together properly, these tow documents will provide you a snapshot of your financial health and make you more aware of how you’re spending and savings habits are impacting your ability to achieve your financial goals. 

Save aggressively. Spending less than you earn and saving the rest is the most important variable we can control to reach our financial goals. Since we cannot control investment returns, inflation or predict the future, control what you can and prepare for the unexpected. Start by building an emergency fund that can cover a year or more of living expenses to provide some peace of mind, flexibility and protection in the event of a career transition. Just ask anyone who has been out of work during the last few years and you will understand its importance.

Invest sensibly. Use your savings to build a low-cost, broadly diversified, tax-efficient, investment portfolio consistent with your goals and investing temperament. This kind of portfolio allows you to keep more of your investment returns rather than paying unnecessary commissions, fees and taxes. This will increase the chance that you’ll stick with your investment plan through good times and bad.

Protect yourself, your family, and your assets. Implement a sensible insurance and estate plan. The most sophisticated investment plan will not protect you if you experience a catastrophic financial loss and don’t have sufficient insurance coverage, or an adequate estate plan to safeguard you, your family and your assets.

Take care of yourself. For most of us, our greatest financial asset is our ability to earn a living. Simple changes can improve your health. Eating well, getting enough sleep and exercising will help you look and feel better while boosting your energy level. Also, make sure you continue improving your job and career skills to increase your value in the workforce.

Take action. The most important step toward reaching any goal is taking action. Don’t worry about creating the perfect plan, just build a good one, implement it, and make changes as needed.

In future articles and blog entries we will offer additional common sense steps to help you achieve your financial goals.

This article is for general information purposes only and is not intended to provide specific advice on individual financial, tax, or legal matters. Please consult the appropriate professional concerning your specific situation before making any decisions.