Do you ever drive through a neighborhood of million dollar homes and wonder how on Earth people afford them?Read More
You're standing outside watching your neighbor park a new Corvette in his driveway. You stare at your 10-year old Ford and wonder, ''What am I doing with my life?'' Before you start the comparison game, here's how you can manage your money now to live your dreams in financial security.
Rule 1: Know what YOU want, be specific and detailed, and how you will achieve those objectives. Saving for retirement? What does that that look like? Will you travel? Where? How much? Do you want to a start a business in retirement? What will that require?
Rule 2: Visualization is a powerful tool. If your current financial objective is to own a house, be specific about size, neighborhood and amenities. When you can “see” your goals you can stay focused on them and avoid such distractions as $84,000 cars and $3,100 Fendi purses.
Rule 3: A successful financial strategy is based on honesty, priorities, budgeting and discipline. When considering an indulgence -- a fancy car, exotic vacation, or elaborate hobby – the first question should be, Why? Is this a hey-look-at-me thing, or will you get real and lasting satisfaction from your expenditure?
Rule 4: If your motivation is healthy, the next step is to see how this undertaking fits into your priorities and budget. How will this additional cost impact your ability to pursue established priorities? Can you truly afford it with your current income and expense structure? If not, there are options – maybe a second job, or trimming other expenses to free up money for your passion. With a little effort, you can also cut the cost of your indulgences. Book that amazing vacation on the cusp of the off-season, or find a comparable, less popular destination. And does your dream car have to be new?
Rule 5: A successful financial plan is a straddle that allows for enjoyment today while building wealth and security for tomorrow. The next time you watch your neighbor pile his new Calloways in the Maserati for a round at the country club, smile, wave and remember that we’re all on our own financial paths. If you have chosen wisely, your modest sacrifices will be greatly rewarded in time.
As radio host Dave Ramsey says, “If you will live like no one else, later you can live like no one else.”
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There are no secrets to successful financial planning and investing. In fact, the core principles have routinely been shouted from the roof tops for at least 200 years in pamphlets, handbills, sermons, speeches, books, radio shows, TV programs, audio tapes, DVDs, blog posts, tweets, and probably even Snapchats.
I recently came across a list of well-known money-related quotes that pretty much distills the financial wisdom of the ages. Here are my Top 9.
“Rather go to bed without dinner than to rise in debt.” – Ben Franklin. This two-century-old gem pointedly reminds us of the corrosive effect of debt, and wisely urges us to avoid it. Yes, there is “good debt,” including mortgages and business loans, which helps build assets. But many Americans carry too much “bad debt” from credit cards and other consumer loans that were used to finance a lifestyle beyond their true means.
“In investing, what is comfortable is rarely profitable.” -- Robert Arnott. A good reminder that risk is an unavoidable part of investing. And, the higher the risk, the higher the potential returns. In shaping an investment strategy, you need to honestly assess your risk tolerance and create a diversified portfolio that includes some acceptable higher-risk investments. The younger you are, the more risk you should consider.
“Know what you own, and why you own it.” – Peter Lynch. Seems obvious, but many investors have lost track of their holdings, or never fully knew them. The journey to financial success is like any trip. You need to know both your destination and how you are getting there. Otherwise you’ll get lost, or take much longer than necessary to arrive. Review your portfolio on a regular basis and tweak it as needed.
“Speculation leads you the wrong way. It allows you to put your emotions first, whereas investment gets emotions out of the way.” – John Bogle Successful investing is a marathon. You need to set specific goals, settle on a strategy and execute that strategy consistently and dispassionately – year in, year out. Jumping in and out of the market based on fear or greed is bad for both your nest egg and your stress levels.
“Personal finance is not rocket science. Personal finance is about 80% behavior. It’s only about 20% head knowledge.” – Dave Ramsey. Discipline is everything. It’s not enough to say you are going to cut your spending and increase your savings. You have to actually DO IT. Consistently.
“I will tell you how to become rich. Close the doors. Be fearful when others are greedy, be greedy when others are fearful.” – Warren Buffett Be wary of the ‘hot thing.” Be careful about jumping on the latest investment trend. Seek out the upside opportunities when things are looking bad. When Apple stock recently took a slight tumble, smart investors saw that as a “sale” on a great stock, not a sign to dump their shares.
“The four most dangerous words in investing are, ‘This time it’s different.’” – Sir John Templeton. Beware of false prophets, both purveyors of doom and sunshine sellers. Learn a bit about the market -- it’s history and patterns.
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” -- Paul Samuelson No day trading. No. Day. Trading.
“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.” -- John Bogle There will be market ups and downs over the course of your investment journey. A few will be dizzying. But over the past 100 years the market has moved steadily higher. Keep your perspective. Remember: The current value of your portfolio means very little if you are 20, 30 years away from retirement.
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