Achieving financial success is a great part of the American dream, but it’s not easy to do if you aren’t focused on the goal. Real financial security doesn’t come about by accident. These careful steps for financial success will help you build a solid financial future.
Know Where You Stand
The average American household has $15,263 in credit card debt, $147,591 in mortgage debt, and $31,646 in student loan debt as of August 2013, according to NerdWallet. If these numbers seem big, either you’re managing your money better than the average citizen or you’re blissfully unaware of your financial state.
It’s easy to disregard the real figures and simply pay the minimum on your debt each month. If you don’t currently know how much debt you have and how much interest you’re paying on it, you need to find out immediately.
Take Advantage of Money Management Tools
With apps, online tools, and computer programs widely available, there’s no excuse for mismanaging your money. However, a CreditDonkey.com survey found that only 27 percent of people take advantage of a mobile app for money management. Forty-four percent reported using a website, but that’s still less than half.
Don’t rely on a paper ledger or your own mental math to help you get by. Track your income and spending carefully so you’re always confident that the money you’re bringing in far exceeds what’s going out.
Address Your Attitude Toward Money
Most people can easily identify as either spenders or savers. If you’re a spender, it’s helpful to recognize this tendency so you can put more effort toward saving money for your future. The environment that you grew up in impacts your spending and saving tendencies as well.
In a bizarre phenomenon, it’s been observed that people who grew up poor will spend more during a financial crisis than those raised in wealthy homes. Facing your habits head on is the best way to thwart them if they’re not leading you toward financial success.
Learn How to Shop
If you walk into the store blindly without a shopping list in hand or a spending budget in mind, you’re not setting yourself up for financial success. Shop mindfully to get the most out of every dollar. The tighter your budget, the more carefully you’ll need to shop, but every dollar matters even when you have extra funds. Wealthy people know how to live below their means.
Learn what a really good price is in your area for grocery staples like ground beef or bread, so you can recognize a sale. Shop around before making a big buy. Never enter a store without a shopping list and budget in mind so you can resist impulse buys that you don’t need and can’t afford.
Talk to a Financial Adviser
The earlier steps will help you educate yourself about your financial state independently, but there’s value in getting a professional’s input as well. Research your options before you choose an adviser.
Whether you have a significant amount of money to invest or you’re simply beginning a small nest egg for retirement, the right professional can give you information you might not otherwise find yourself.
Have an Investment Plan
A 2012 study by the Employee Benefit Research Institute revealed that 60 percent of workers have less than $25,000 in savings and investments, excluding the value of their homes and defined benefit plans. In 1991, just 11 percent of workers expected to work past the age of 65, but by 2012 that number had swelled to 37 percent. The best way to secure financial success is to prepare for the future. Invest as much as you can in a diverse portfolio, adjusting the risk level for your age.
You may also want to consider investing in annuities so you can have a steady stream of income later in life. There are many benefits to annuities, but before you invest your money, you should research the pros and cons of equity-indexed annuity guarantees.
Prepare for Emergencies
Financial guru Dave Ramsey recommends setting aside at least $1,000 for emergencies before you begin an aggressive plan to pay off debt. The standard recommendation from most financial advisers is to have at least three months’ worth of living expenses on hand to help you weather the loss of job or other major financial setback.
If you have your money tied up in debt or even investments, you won’t have what you need to deal with something like a car repair or medical emergency. Build an emergency fund for these things so you can sleep easily knowing you’re prepared.
Achieving financial success takes a great deal of dedication and preparation. With proper planning and motivation, however, financial security and success are achievable for nearly anyone.
Image via Flickr by 401(K) 2012
Having a plan is paramount. Without one, how do you know where you are going or when you get there? You’ll have no idea. As a result, you end up aimlessly wandering around, never making any progress.
Great point on addressing your money mindset. So many advisors fail to understand how to address a person’s attitude towards money. Since that’s the most driving force in their financial health, understanding your mindset gives you a chance to control it, or at least compensate for it.
I also think the points about attitude towards money are important ones. It is all very well knowing what you SHOULD do, but it is another actually being in the right frame of mind to see it through!
Couldn’t agree more. Have a plan of the direction you are taking financially and definitely have an emergency fund, it will cushion you and provide peace of mind that would enable one survive most financial storms!