1. Setting Priorities: The first — and often the hardest — step in achieving your financial goals is deciding which goals to pursue. What sacrifices are you willing to make? Decide if you are willing to forgo immediate pleasures for long-term gains.
Building wealth is no different than taking a trip. You must have a road map to guide you from point A to point B. You can do this by defining both short and long-term goals.
Determine what financial freedom means to you and your spouse. Write down the goals together and establish a deadline to achieve, with benchmarks along the way.
2. Making a Budget: This is the most important step to obtaining financial freedom. Making a budget will allow you to bring your spending under control, so that you get the most out of every dollar. Evaluate your current financial situation and determine what immediate steps and sacrifices you will need to make. By tracking your everyday purchases over a 60-day period, you can get a bird’s-eye view of exactly where every penny is being spent. Create ways you can decrease expenses and increase income.
3. Basics of Investing: Engage in various resources to establish a good foundation of the basics of investing, i.e. newspapers, web research, classes or educational seminars. You will need to enhance your education in order to understand “the numbers” in order to understand your personal finances.
4. Investing in Stocks: You may have had a successful business or climbed the corporate ladder. But you are going to reach a point in your life where you are going to have to invest. Your net worth will grow, as will your idle cash. The market can be a great place to turn savings into wealth — or to lose your shirt. Learn the market, the risks of investing, and chose to invest wisely so your money is working for you.
5. Bonds can provide a steady and reasonably secure income, while adding ballast to your portfolio–but only if you really understand what you’re buying. Bonds are known as alternative, or “alt,” investments that can help diversify your portfolio. When the market experiences volatility, alt investments can help protect against volatility in your investment values. Be sure to speak with your financial advisor on alt investments that may be right for you.
6. Buying a Home: Owning your home is part of the American Dream, but if you’re not prepared, buying it can be a nightmare. Some generations may not perceive owning a home as a valuable asset, but this can be a critical step to financial freedom. Obtain a quality mortgage, buy at the right time, and occupy the primary residence for 2 out of years, it can have a tremendous impact on the profit earned if you are single or a couple.
7. Controlling Debt: Creating the budget in Step 2 is going to really help you visualize what your debt is. You’ve got to know when to hold debt–and when to fold it. Hire a financial advisor to help guide you to your goals, keep you on track and accountable. This lesson shows you how to accomplish your financial goals by making debt work for you.
8. Start a Small Business: Consider igniting that entrepreneurial spirit by starting a small business. There are significant tax advantages, unlimited income earnings potential and an ongoing source of income once you enter retirement.
9. Kids and Money: Up until they start earning a living, and sometimes well beyond that, kids are apt to spend money like it grows on trees. Educate them about finances. It will help you put your children on the road to handling money responsibly.
10. Planning for Retirement: Achieving a comfortable retirement in the 21st Century requires a new approach to retirement planning. Each day, visualize what it will be like once you achieve financial freedom. Close your eyes and see it happening. Contact your financial advisor to make sure you are on the right track.
11. Asset Allocation: The single most important thing an investor can do is practice asset allocation. Learn various ways you can allocate by educating yourself. Read the Wall Street Journal, take 15 minutes of every day to study the markets and the economy and become familiar with what is happening in today’s economy. You will be amazed at what 15 minutes can do.
12. Insurance Protection: You may think your finances are in line, and you are on track for retirement, but suddenly an unexpected accident or event happens and you don’t have the insurance to protect yourself or your family. Talk to your insurance agent and make sure you have umbrella, liability and other insurance necessary to protect the wealth you have spent so much time building.
13. Estate Planning: Americans are in the midst of one of greatest inter-generational transfers of wealth in history, yet few of us have done any planning for it. Take the time to meet with an estate planning attorney to make sure your wealth is passed on to your heirs, not the government. Create a living trust, then update your estate plan annually.
14. 401(k)s: It’s the most important tool you’ve got for retirement. If not your first, it will be your second largest asset that will make up your retirement income. Learn the rules and ways you can contribute to the plan.
Achieving financial freedom takes time, discipline, courage and solid goal planning. Make a commitment that you will achieve financial freedom, today. Now go make it happen!