As economic conditions deteriorated across the country over the last 18 to 24 months, many families discovered they were unable to manage the extra financial stress - whether it involved the loss of a job, decreased cash flow, increased family expenses or trying to plan for college and retirement. The good news is that the recent downturn helped many people increase their understanding of personal finance. Many learned first hand the importance of protecting themselves and their family from future financial problems and the devastating effect it can have on their life.
In his book, Yes, You Can... Achieve Financial Independence, James Stowers shares his insights into how anyone can improve their financial position, and more importantly their lives, by following some basic principles of success. Many of these ideas, and more, are shared in our Declaration of Personal Financial Independence™.
Use this document as your guide to get and keep you on course to reach your financial goals. Simply print out the declaration, fill in the blanks, sign it and post it where everyone in the family (including you) can see it on a daily basis.
Are you determined to become financially independent? Then why not make a commitment to follow these simple rules?
- Define your financial goals. Write them down and create a plan to help you achieve them.
- Make a spending plan and stick to it. Keep track of everything you earn and spend. Review it regularly to make certain you are getting your money's worth.
- Stay on course, even when you are tempted to buy something that seems like a really good deal at the time.
Define your financial goals
You cannot accomplish your goal of achieving financial independence by wishing. It takes a commitment and absolute determination to act. Start by setting a specific goal, such as: "We will set aside $100 in an emergency fund each month." Or, "I will invest $2,500 in a retirement account this year." Keep an eye on your savings and watch it grow. Small successes can motivate you to stick to your goals and strive toward bigger goals.
Make a spending plan and stick to it
To best manage your money wisely, you need to know where it's going. Keep a list of everything you spend. At the end of the week, review your list to find areas where you can reduce your expenses. If you eat lunch out everyday, try bringing a sack lunch to work. If you determine your family's clothing budget is out of control, watch for sales and try to purchase staple items when seasonal markdowns are available. The goal isn't to deprive yourself of what you may think are essentials, it's to make certain that every dollar you spend delivers an equal or greater value in return.
If you can find a way to save just $25 each week, at the end of the year you will have accumulated $1,300 that can be invested towards a long-term goal, like a child's college education.
And, when you consider the value of compounding, that $25 per week invested at eight percent could be worth approximately $41,900 after 15 years. Don't wait. The sooner you get started, the more you can save.
Stay on course
As we continue to dig out of a period of cutbacks, it might be easy to slip back into the old habits of impulse buying, especially if you and your children see friends and family members buying the latest recreational items or gadgets. Sit down as a family and determine ways you can enjoy life without spending more.
While the latest toys may seem like "must-have" items now, they'll probably be replaced by something newer in just a few months. And, the purchase could push your goal of financial independence further out of reach.