If you put your excess money to work earning a return, you will surely grow your wealth.
Education
Being qualified for employment is essential. What is it you have a passion for? Can you gain skills on the job? Do you need a college degree or some special training for IT? What is your pleasure? How about a trade? Are you considering being a plumber, electrician or handyman? Perhaps you would like to obtain a real estate license. The possibilities are endless.
Create yourself. Develop your skill and hone your craft. What are you good at? It is different for everyone. Find your niche. I believe you get my point here. I am not talking about some fancy degree from some overpriced university.
As you can see, this is another element of a strong financial plan. We spent time developing a budget, but were you overspending or did you need to enhance your income? My guess is a little bit of both.
Home Purchase
Everyone wants to live the American Dream. Owning a home is part of that dream. Some will say it is not possible: “Prices are too high and I could never buy a home.”
Once again, with proper planning and purchasing within your means, it is possible. Start small and build equity. Trade up. Never go beyond your financial means.
The financial objective is to get the house paid off. What would it be like to have no rent or mortgage? What would you be able to do with that money? Build wealth!
Investing
Learn about investing. What will you put your money into to earn more money? Certainly, you heard it takes money to earn money. Look at it from this perspective. If you put your excess money to work earning a return, you will surely grow your wealth.
So, once again, education is necessary. Learn about stocks, bonds and real estate, alternative investments.
There are a couple of things to be careful about. Never borrow to invest. The risk is too high. What happens if the investments go under, then you have debt with no assets.
Do not ever invest in something you do not understand.
Diversify. Never bet the house on one investment. That sure thing will surely be the thing that robs you of your wealth.
Understand what your risk tolerance is in investing. Do you like stocks? Or perhaps real estate? Or maybe a little of both. Only pay cash and be consistent. This is a long game. Don’t be short-sighted and hire a professional to help. Vet them; make sure you hire one, if you do, that teaches not tells. Remember, it is your money!
Taxes
The objective is to never pay any more than you must. Pay your fair share. Only pay what you owe.
As we know, there are plenty of taxes to pay. Start with social security tax, Medicare tax, federal income tax, and state income tax. Then there is sales tax and property tax.
Don’t have taxes over-withheld. Take home as much as you can.
As your wealth grows, you may need to do some tax planning. Learn what you can and hire a professional to help.
Retirement Planning
Planning for retirement is a critical step in building your wealth. This is a long game. The more years you have, the longer you can build up your retirement accounts. Your goal is to put away up to 15% of your income for retirement. Once again, be consistent and invest wisely.
Use any employer retirement plans to your advantage. Always take the match, consider it free money. Next is to use a Roth. Max out these first then use any other retirement vehicle to get to the 15%.
This, for many, is their number one wealth-building tool. Use it to your advantage.
Risk Management
Now that you have worked hard to build your wealth, it is time to protect it. Insurance is your best course of action.
There are many different types of insurance. Car insurance and homeowners are two everyone carries. Then there is health insurance. Some carry an umbrella policy. Life insurance is another coverage that may be needed.
The objective is to protect you, your family and your assets. A risk management program is different for everyone. Decisions can be made to have this coverage and not have this other coverage, depending on where you are in your wealth-building journey.
Estate Planning
So you have spent the majority of your life building your wealth, developing a plan, working at it regularly. Now is the time to plan for your demise.
What I usually tell folks is if you love your loved ones give them all the information they need. Do not make it a treasure hunt. Name beneficiaries, primary and secondary. Complete a will. Perhaps a power of attorney.
Give them what they need to complete your final wishes.
With the completion of the valuable information in Parts I and II you now have a high-level outline to create a Winning Personal Financial Plan.
What do you think? Will you do it? What do you have to lose? What you are doing now is not working!
You work hard for your money, make sure it stays your money!
Thanks for reading – I hope you found this helpful. QCBN
By Steven Calabrese
Steven Calabrese, CPA, is the CFO of Polara Health. He also is the owner/operator of a website known as thebiweeklyadvisor.com, where topics such as budgeting, investing, paying off debt and goal setting are discussed.
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