Four Recipes to Financial Success
Below are four recipes to financial success. By that, I mean that if you focus and do just one of these things well, the chances of having success with your finances will increase. You can be successful and find a level of success that will propel you to even more success. Everything starts somewhere, and the beginning to making better financial decisions can start with the recipes or tips below.
A Recipe to Financial Success is Having a Plan for Your Money
Having a plan makes a big difference in whether or not we win with money. By plan I mean having a spending plan. I like to call it a spending plan for two reasons. One, it is a plan to spend your money. Two, when you hear the word budget, you think of restriction or something you cannot do.
Calling it a spending plan gives you permission to spend on purpose because it’s your money anyway.
Spend Less Than You Earn
Live within your means. Just because you have created a spending plan does not mean that you are home free. Now you must stick to your spending plan, which is a whole other thing. You cannot be successful and spend more than you allocated for a particular spending category in your spending plan. So, for example, if you plan to spend $300 at the grocery store, you cannot go out and spend $400. This kind of overspending is a destroyer of spending plans.
Financial Success is Preparing for Unexpected Financial Events
Another issue for spending plans is the unexpected event. Let’s say you created your spending plan and are moving well through the month. You are following your spending plan, and then an unexpected event happens. Your mom or dad gets sick, and you must travel to see them.
Emergencies or contingencies are going to happen, and although we know that they are going to happen, you cannot plan for them specifically, but you can plan for them in a general way by saving up an emergency or contingency fund.
With this fund, you can take care of emergencies and contingencies when they come, and it does not affect your spending plan. A good rule of thumb is for three to six months of expenses into an emergency or contingency fund.
Preparing for Expected Events is a Recipe for Financial Success
Preparing for expected events is another key to financial success. You have spent most of your adult life doing things the “right” way. You planned to spend your money, you saved, and lived within your means. Then you get to the point in your life where your children are ready to go to college, and you have not saved enough.
How about retirement, are you ready? Have you saved enough? If you have not, what do you do?
The other side of this is to plan for these expenses and begin to save for them. The key is to determine the number or amount you are trying to reach. How much will you need to save for your children’s education? How much will you need to retire the way that you want to? Once you find these numbers, you can begin to save and reach them. Preparation is the key.
These are just some of the keys to financial success…can you think of others?