| Top 10 tips to foster financial freedom |
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| Written by Talane Miedaner | ||||
Page 2 of 2 6. Automatic savings of 10% of your income Set up your account so that the bank automatically deducts 10% of your income from your paycheck before you get your hands on it. And have the 10% go into a savings account that isn't connected to your ATM card--i.e. the less accessible the account it, the better. This is your Financial Reserve account --the first step to Financial Independence. You might feel the sting the first month, but after that, you won't even notice it. If you do, then try paying cash for everything instead of using credit. People who pay cash spend 10% less than those who use credit. Something about having to fork over all that money makes you think twice! Once you do this, you are on the path to Financial Independence. If you are already saving 10% then move it to 20%. 7. Get out of Debt You can’t be your best if you are living with credit card or unsecured debt (your mortgage doesn’t count as debt as it is secured by your home). Start making regular monthly payments to pay off your credit cards, but do not do this at the expense of saving 10%. First save your 10% and then pay off your cards. If that means you only have $10 to pay off your cards, so be it. You must get into the savings habit as soon as possible. I realize that at high interest rates, it makes more sense to put all your money into credit card payments, but then what happens when you have an emergency and need the money and have no savings? You put it on credit again. It’s very hard to get out of debt this way. Take advantage of free credit counselling services if you feel overwhelmed by your debts. They will help you sort it out and even negotiate with your creditors for you in some cases. 8. Set up a Reserve Account The first financial goal to reach is an emergency reserve account with a minimum of 3 to 6 months living expenses. Ideally, you’ll want a 1-2 year cash reserve. If you spend $3000 a month on expenses then that means you need at least $9000 as a minimum saved in a liquid money market or savings account you can access quickly. Having even this small buffer will give you a feeling of peace and security, making it more easier to attract more money into your life. 9. The Financial Independence Game Once you’ve created a six-month reserve and have been regularly saving 20% of your income, you are now ready to play the Financial Independence Game. This is a game worth playing as you have nothing to lose other than a load of debt! Anyone can play this game. You don’t need to inherit wealth or win the lottery to play. The first step is to decide how much money you need to feel financially independent. Most people overestimate this number and think in terms of millions. I’m not talking about living a fancy lifestyle. If you lived simply, you could live on the interest of $250,000. This would generate $1250 a month at a conservative rate of interest at 6%. If you did any work at all, your lifestyle could go up. One of my clients figured out that if they saved $2,000 a month for fifteen years they would be able to retire at 40 and live off the annual interest of $30,000. 10. Protect your Stuff It doesn't do any good to be financially independent and then lose it all needlessly. Given Murphy’s Law, if you have insurance, you will never need it. If you don’t, disaster will inevitably strike. What do you need to protect yourself, your family and your belongings? Here are some common things that need coverage: ¸ Homeowner’s or renter’s insurance ¸ Major medical health insurance ¸ Auto Insurance ¸ Term life insurance ¸ A revocable Living Trust ¸ A Living Will ¸ Valuable documents secured in a safety deposit box ¸ Jewelry and coins ¸ Computer Back up System ¸ Disability Insurance (especially if you are self-employed) ¸ Long-term care insurance (for your parents and/ or yourself) Consult a well-recommended certified financial planner for advice on your particular financial and insurance needs. For some free basic legal documents including a Living Will go to www.legaldocs.com
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