One of the most rewarding things of my career is sharing what I have learned with others. Nothing inspires me more than seeing someone unlock their full potential, and it’s never too late to start this journey. But it is also important to remember that sound personal financial habits are the foundation to success.
Do Won and Jin Sook Chan provide a great example of how pairing a willingness to work hard with smart financial decisions can pay off enormously. This couple arrived in the United States from South Korea with nothing more than a dream and a high school education. They simultaneously worked at a coffee house, a gas station and a cleaning business to start saving money.
After a long period of hard work and prudent saving, this husband and wife duo opened a small clothing store for women. Today, Forever 21’s success has made the couple billionaires several times over. The Chans exemplify how success in life often flows from doing the right thing financially, even when you are just starting out.
Here are five important financial rules for wealth and happiness:
- Make a Spending Plan and Stick with It
Crafting a detailed household spending plan (budget) is a fundamental financial practice that everyone should follow. Unfortunately, far too few actually do. Statistics show that only one-third of Americans prepare a household budget.
This is a critical error since you can’t plan effectively for the short-term or long-term if you don’t know what you are spending. A budget helps you identify areas where you can save, gives you a window into your spending habits, and provides a reference point for important financial decisions.
- Create a Rainy Day Fund
Few things will spoil your day faster than having to deal with an emergency and not having the financial cushion to do so. Unfortunately, 60 percent of Americans are at risk of experiencing this very scenario because they have no emergency savings.
Ideally, you should have at least several months of pay in a rainy day fund. If you cannot do this, try putting aside $500 or $1,000. Having a little extra money saved is far better than having nothing at all—especially since it might be help you avoid resorting to high-interest loans when problems happen.
- Invest in Assets
When it comes to building wealth, creating assets is a critical piece of the puzzle. Whether you are accelerating your savings with compound interest or investing in real estate, make your money work for you. Investing in assets is how you do this.
If you have a 401k, be sure that you take advantage of maximizing your contribution by investing at least as much as your employer will match, since this is basically free money.
- Manage Debt Effectively
A big problem with getting mired in too much high-interest debt is that it detracts from allowing you to save more money. It will also increase the time to pay off your debt if you are not able to do so immediately. Remember, every dollar spent on debt interest is a dollar that could be saved or invested. By keeping your debt ratio low, you can build wealth much faster and ultimately, achieve financial independence.
- Maintain Good Credit
A poor credit score doesn’t just make life more expensive, it can prevent you from getting the job you want, buying or leasing a home and even getting something as simple as a cell phone. By maintaining a high credit score, lenders will compete for your business by offering you the best rates possible. This way, you will find that life is not only less expensive, but far easier to navigate.
The Bottom Line
These five tips will help you build a solid foundation that will mitigate financial stress and open up your future prospects. By focusing on these key points, you will be on your way to a happier, healthier and wealthier life. You deserve it!
Contact me today to learn more about financial literacy and empowering your future.