Table of Content
Spend Less Money Than You Earn
Spending less than you earn is a good money habit that should be part of your lifestyle. It can help you avoid unnecessary debt while allowing you to make extra money for purposes such as saving and investing. If your circumstances don't allow you to do this yet, you can always start as soon as you can. You have to remember the end result is to achieve financial success.
Establishing Your Net Worth
The first step is to determine where you stand financially. Do you have money in the bank, do you owe people money, are you working?
Knowing the answers to these questions can help determine your current financial situation. This allows you to see how far you are from your goals and prioritize your budget
•Assets are anything we own, such as cars or baseball cards.
•Liabilities(debt) are what we owe, or our debt
•Net Worth = Assets – Liabilities
•Equity means ownership
Establishing Your Income
An important factor in creating a budget is understanding your income (is the money coming in through wages earned, allowance, or other sources). Having an income is the primary means by which a person saves money, builds wealth, acquires assets, and satisfies wants and needs. An individual's income is often influenced by decisions about education and career choices. More education and professional training generally means more income.
You Can Start investing early
Investing early can give you a big advantage. Not only can you plan your investments, but you can give your corpus enough time to grow to meet your financial goals. Compound interest basically means that you reinvest the profits you make from your investment so that your investment grows exponentially.
6 Steps of Financial Planning
Personal financial planning involves setting financial goals, including spending, fundraising, and investment plans necessary to reach your goals.
A good financial plan is like a builder's blueprint. The plan should detail all aspects of how wealth is accumulated, increased, and prepared for emergencies.
Step 1: Set goals
This seems fairly simple, but this step is often overlooked. Consider short-term, long-term, and “wish-to-have” goals. Be as honest with yourself as you can when setting goals. After all, this is your life! How do you want to live it?
Step 2: Gather facts
Take the time to collect and organize your financial documents. This includes searching digital folders, paper filing cabinets, and tax records. Be sure to include assets and liabilities, cash flows, tax returns, insurance policies, wills and legal documents that may contain related information.
Step 3: Identify challenges and opportunities
Take a moment to quantify the picture you have in your head. Identify challenges or opportunities you may face regarding cash flow and debt, college planning, retirement planning, and risk management. Remember, this is the situation today. We can create your future together.
Step 4: Make a plan
Let's get down to basics. Your plan should take into account your values and risk tolerance. Ultimately, the plan should include various options to consider and implement.
Step 5: Carry out the plan
Taking action is probably the hardest part of the planning process. Your plan may include increasing your regular savings, purchasing additional insurance, contributing to an IRA, or investing. Whatever your next step, we can help.
Step 6: Annual follow-up and review
This final step is often overlooked, but critical to achieving your goals. You should review your plan annually and adjust your goals to suit your current living situation. This may sound difficult, but it's not. We are always here to help you stay on track.
What Are The Best Wealth-Building Assets?
Traditionally, real estate, real estate-backed personal debt, stocks, and certain retirement accounts were the best assets for building wealth. This is because each of these assets has the potential to generate stable cash flows. Other wealth-building assets can provide returns for savvy investors, but these are considered the best performers. But because we are part of the 21 century there are new trades in the market such as crypto currency and others investment plans.
Real Estate Investment
Real estate is perhaps one of his most famous wealth-generating assets. Real estate has historically proven to be a lucrative investment for those who know what they are doing.A 2017 study found that the average rate of return on real estate over 150 years is about 8 % was. Stocks were the next best asset, with an average return of around 7%. Other wealth-building assets such as bonds and CDs averaged less than 3%.
Stocks of listed companies
Listed stocks are another well-known example of investing. Stocks offer investors the opportunity to buy shares in companies and earn a profit. Stocks have proven to be powerful assets over time. As already mentioned, a 2017 study found that stocks have proven to be very successful investments with an average return of around 7%.
Retirement account
Retirement accounts, especially 401(k) and Roth IRA accounts, can be excellent wealth building assets. But there are pitfalls:
You cannot access your funds until you reach retirement age. These options do not increase your current regular income, but they can provide you with a financially stable future.
A Good Handle Of Your Debt
Many people believe that being debt-free is ideal, but in many cases, debt can actually be seen as good for your finances if it helps you build wealth. For example, if you can't afford a house with cash, you might take out a mortgage. This allows you to build your real estate fortune using a mortgage instead of renting.
Loans, like mortgages, are usually considered good debt because they provide value by helping the borrower build wealth. However, many other types of debt are not so healthy for your finances. Here are some examples of good and bad debt.
I believe if it is a moving liability do not buy it for example a car. That should be bought cash so that you own it, making it an asset. In order to achieve your financial goals you have to understand financial success and wealth building is a mindset. Your savings and investment will help you access the life you've always dreamt of.
Emergency Funds Are In Place
Nothing is as disturbing as an unplanned event that requires money. An emergency fund, as the name suggests, is a fund set up for emergencies. These are unexpected expenses such as medical bills, home or car repairs, or sudden unemployment. Suddenly your car breaks down or your house needs drastic maintenance. It's best to have funds ready for situations like this. That way, you might end up in debt by using your savings or using a loan to make the payments. Emergency funds act as a safety net to avoid financial setbacks and adverse consequences.
Why do you need an emergency fund?
Not only is the emergency fund used for unexpected medical and household expenses, but it can also complement day-to-day financial management when you need additional support without taking out a loan.
Because Understanding Financial Success Is The First Step To Achieving It
In conclusion you now understand In order to achieve financial success you need to be mindful of each and every financial decision you make and commit to. The six steps of financial planning have been highlighted. The Best Wealth-Building Assets have been provided and tips to financial growth have been given. Change how you think about money so that money can be the gateway to your freedom. Your finances should not stress you but rather they should an opportunity to grow. Start now by joining the Glow App waitlist and stand a chance to win amazing prices in your lifetime free account.