My financial blue print has five essential parts for simplicity and clarity.
Budget
I think everyone should have a budget, so they know where their money is being spent and more importantly where it can be saved. An well written budget and a written plan of action for reducing expenses is an excellent start. Plus a budget with an excess each month provides some immediate peace of mind.
Living below your means
I think people commonly think a budget is used to determine how you spend all your money, every paycheck. Instead of a means for seeing how to reduce your expenses every month. I think the change in financial and mental attitude which occurs when you embrace this idea mentally and emotionally is such a huge turning point in your financial journey. When you can decide not to buy things like a new car, new computer or new phone, even though you can afford them, because your desire to save is stronger then your desire to spend and possess things. You have reached a high point in financial evolution.
Savings
I believe in saving money from every paycheck, and saving 75% of all bonuses. My goal is to save 3 months worth of living expenses. This is hard to do, but not impossible. Once this goal achieved a special sense of serenity is accomplished like nothing else in the world.
Invest in performing assets.
I always recommend investing in an index fund and a having a portfolio of dividend paying stocks. An asset appreciates in value. A performing asset both appreciates in value and pays you regular income. Index funds and dividend stocks do both. This is part four after the above, because the above help you stop living paycheck to paycheck, achieve financial peace of mind and put you on the road to success. Stage four is where you start building up passive income, that will eventually pay all your expenses.
Invest in Whole Life Insurance
We all need a personal bank, where we deposit money and borrow money separate from a Commercial Bank. A whole life insurance policy should be part of your long range financial planning. It protects your loved ones in case of your untimely death, but it’s also structured as a financial tool you can use throughout your life.
The goal; Financial Independence
I define this as when your passive income from your performing assets pays all your bills. This may take years of saving and possibly working side jobs to put extra income in your investments. And I believe you really should enjoy the peace and calm you find while on this journey, as you slowly build your passive income towards this goal. This goal can be achieved on a timeline you create alongside your budget.
Remember, if you look around one day and see that none of your friends are doing any of these things and you wonder if these sacrifices are worth it. Please remember that 50% of American Families surveyed were one missed paycheck from being homeless and the other 25% were two missed paychecks from being homeless. Most have no savings, no investments and no plan to achieve financial freedom, and many can’t even define it in concrete terms.
If you do what that 75% are doing, you will get, what that that 75% is getting. But if you wish to join the small minority of people who are financially independent or working towards it, you must do what that minority does and all plans for success contain the elements above with sometimes different asset class mixes like real estate or precious metals. Your plan may differ in details, but the core elements should be the same.minority do, with a well researched plan, similar to what I have outlined here.
Knowledge, planning and execution are key. Failing to plan, is like planning to fail.
But plans without action are not really plans, they are just dreams.
Be a doer.
Written by Shortsegments.
A blogger in this community for 24 moons, a student of finance and proponent of decentralized finance.
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