Everyone’s personal finances are different. And so are our goals. But there are a few common denominators that should apply to any person seeking financial liberty. To exercise discipline in your daily life and set yourself up for long-term financial prosperity, put these four financial goals in your to-do list today.
Don’t Accumulate (Bad) Debt
Some financial thought leaders, such as Dave Ramsey, believe that all debt is bad debt and that using cash for purchases is the only way to live. Others argue that buying a home or taking out a business loan are examples of good debt because they (ideally) allow you to increase your worth over time. Bad debt, on the other hand, includes credit cards, payday loans, and auto loans — all of which carry excessive interest rates that usually result in debtors paying substantial amounts more than their original loan. So, avoid racking up credit card purchases that you can’t pay off in a month, and only take out good debt if you can afford to make the payments and believe in the long-term investment.
Maintain an Emergency Fund
Between our health, automobiles, housing and infrequent-but-inevitable life events and surprises, having a stash of money “just in case” is essential to being secure in life. Maybe you’re young and haven’t yet experienced the price tag life can carry. In any case, start putting any extra money you have away so your world isn’t turned upside down when life hurls a surprise. It’s recommended to have six months of living expenses saved in an emergency fund, but there’s no magic number of securities. Set-up automatic withdrawals from your checking account into a separate high-interest money market savings account and let your emergency fund grow from there.
Know Where You Want To Be in ? Years
Creating budgets and maintaining spending discipline in our day-to-day lives is great. But without a long-term roadmap of where we want to be incrementally, it’s hard to measure our progress and feel satisfied by our efforts. Setting incremental goals is one of the things Freedom Financial Network CEO Andrew Housser points out as a key contributor to his success. Housser focuses on annual, three-year and five-year goals, but everybody is on a different pace in life. Choose time increments that make sense for your situation and enjoy your progress!
Start Your Investment Lifecycle
Maybe you’ve been putting off investing because you’re overwhelmed with all the terminology or simply not interested in spending more time thinking about your money. However, if you want to be financially independent in your life, investing in the stock market is a great way to make that happen. For example, the S&P 500 index, a weighted index of the top 500 public companies in the U.S. by market value, has yielded an average annual return of nearly 10 percent since its inception in 1928.
The younger you invest, the better, though. Ten percent annual returns doesn’t mean you can sit back and watch your money steadily grow. The stock market will inevitably crash during an economic recession or depression and build itself back up, so investors need time for their wealth to accumulate. Roth IRAs are popular retirement accounts because investments are funded with after-tax money, meaning when it comes time to withdraw funds, investors aren’t taxed on their investment gains.
Though the financial world offers people a lot of options when it comes to strategies to capture and grow our wealth, it’s easy to get overwhelmed by the industry’s complexity. If you’re not yearning for detail, keep things simple; don’t take on bad debt, build an adequate emergency fund, set incremental progress goals and start investing ASAP.
Keeping these areas in check not only means you’re poised for long-term economic prosperity, but you’ll get the regular satisfaction of tracking your progress against your incremental goals, and watching your long-term savings grow as a result.