Imagine you want to build a house and set up a meeting with a builder. During your conversation, the builder informs you that they like to go light on the foundation work to build houses faster. You can move in and decorate sooner than you would be able to otherwise.
Now, no one would take that deal when it comes to their home because we know the foundation is the most important part of the home since it supports everything else. Unfortunately, when it comes to our financial house, we do not always reason the same way.
Too often people are judged as wealthy based on their ability to obtain material things. In a world where debt is relatively easy to obtain, nice things are often an indicator of massive debt, not massive wealth.
Thirty-six percent of people earning $100,000 or more per year report to be living paycheck to paycheck. That is two percent higher than those who make between $50,000-$100,000 per year. How can this be if they are so highly compensated? It's about how much you keep, not how much you make. If all the money you make goes out in payments to someone else, there is none left over for you to secure yourself. A doctor or lawyer with six figures of student loan debt, a Lexus, plus a huge house is broke. That is why it is important not to measure your life by what someone else is doing. You have to run your race.
Just like a house, our finances need to built on a firm foundation. Do not live with your back against the wall financially if you do not have to do so. If you are in a low-income scenario, focus on increasing your skills and seek out better job opportunities.
Here are a few simple rules of personal finance:
Have an Emergency Fund
When you spend all you make and avoid saving, you are living as if nothing will ever go wrong. Life does not work that way. If you have an emergency and you have no money to cover it, you're in trouble even if you have a Mercedes-Benz. Prioritize building an emergency fund of three to six months of expenses over that luxury car. You will be able to rest easy when life happens to you.
If You Don't Have the Money to Pay for It, Then Don't Buy It.
An exception here is a home given that they tend to appreciate in value. Go here for more on buying a home. Do not charge items on a credit card and pay for it later at 20+ percent interest! Unless you have the cash to take cover it, leave it in the store or even the car lot. This alone will keep you out of a lot of trouble.
Invest for the Future
If you keep having birthdays, you will get old. It is much easier to be old with a good stash of cash than old and broke. Since so few jobs pay enough for you to retire in comfort by merely saving, investing money is key to being strong financially. With just a little money invested over you working years, you can retire wealthy. There are also tax advantages possible with investing that are not available when you just stack your money in a bank account.
Of course, the devil is in the details. Your financial strategy will look different from everyone else's strategy because everyone's life is different. If you need assistance in building your financial foundation give us a call or message today! Financial peace is not just for the well-connected or those already rich. It is an accomplishment available to common people as well.