???If you know where you are going, any road will take you there. If you do not know where you are going, no road will take you there???, said a wise person. This quote is very relevant to your quest for wealth and financial independence. If you know where you are headed to financially, then you will be able to answer questions like the following; ???What is your FIN, I mean Financial Independence Number? ???Do you know how much you need to invest today so that you can retire to a lifestyle equal or better than what you currently have? ???Do you have a wealth strategy that will protect you and your family should the storm of peril attack in the middle of the night?
If you are not sure where you stand, this article is what the doctor ordered for you. It will show you how to develop a sound wealth plan and seal gaping holes in your current plan. At least you will be sure of where to start.
There are 3 basic components of a wealth plan. Where you want to go, where you are today and what you need to do.
Why is it important to have a wealth building plan in the first place? If you live to a ripe old age, as we all wish, a time will come when you will be either too old or too sick to work on a full time basis. However, you will still need to pay for living expenses and for other activities that will occupy your time. Healthcare, travel and insurances will be significant expenses in your budget. It is for these reasons that you will need a reasonable, steady and reliable source of income to enable you maintain an enjoyable lifestyle during your retirement years.
1) Where do you want to go?
There are 2 places you ought to be thinking about, before retirement and during retirement. It is easier to plan about before retirement because you know your current financial situation, earning ability and preferred lifestyle. For example, if you want to live in the greener neck of your woods, it is easy for you to determine how much income you require to afford a lifestyle similar to the Joneses who live on the greener, quieter and safer side of town. It is also easy for you to decide how to increase your income. Whether you need to do extra shifts or a side job or go back to school or start a home business.
It is the during retirement part that most people ignore. Yet it is a very significant 25 to 35 years of your life. Thanks to discoveries in science and medicine, people are expected live longer during retirement. What lifestyle do you want to have for 25 years when your regular paycheck dries out? It depends on you. It also depends entirely on how you invest your money many years before you retire. It depends on the dollars you invest before retirement.
Let me give you a clue. Joe is 65 years old and will retire at the end of this year. His Financial Independence Number is 1.2 million and it equals the value of his investments. Joe expects to spend $50,000 every year for the next 35 years till age 100. He therefore needs to invest the $1.2 million in an interest earning account that will give him at least 5% interest per year during his retirement.
Is $50,000 per year good enough for Joe? That is up to Joe to determine. More importantly, what is your FIN? I mean your Financial Independence Number? This is the magic number that will determine how good your retirement lifestyle will be.
2) Where are you today?
If you are like majority of the people, you are only 80% sure of your financial situation. You have no idea what 20% of your money is spent on. The 20% is a very significant portion of your financial status but it is made up of seemingly small transactions that you incur repeatedly without much thought. This will affect your financial well being in the long run.
The average person retiring this year has only $25,000 saved for retirement. If an average retiree is honest with you, he will whisper in your ears that it is those small expenses that are the culprit of his regrettable financial status. It is these expenses he ignored to control that put him in the red.
Let us briefly check where you stand. If your answer is yes to all the following questions, you are on safe ground. ???Do you invest consistently at least 10% of your gross income every month for your retirement? ???Do you save 5% of your gross income every month for emergencies and large purchases? ???Do you have less than 4 credit cards that you pay off in full every month? ???Do you use credit only for expenditures that will improve your financial status e.g. education, mortgage finance or business? ???Do you have these essential insurances: medical, motor, property, disability, term life insurance and personal liability umbrella insurance?
3) What do you need to do?
Creating wealth can be equated to building a house with a foundation and 3 floors.
The most important structure is the foundation. Unfortunately this is the most overlooked part when people start to build their financial house. We call this foundation insurance. The value of a good foundation is known when sudden violent storms blow and the house is able to withstand and remain intact. A house built without a foundation cannot withstand a big storm. It is blown away and the efforts of the builder are wasted. Make sure your essential insurances are in place to weather the storm of financial misfortune.
The first floor is debt management. Avoid credit card debt like the plague. Do not use credit to pay for luxury items, utilities and fun activities. Use cash or debit cards. If you use credit cards to pay for these expenses, then pay off the balance at the end of the month. Interest rates and numerous fees charged by credit card companies are too expensive and will deprive you money to invest. Read Money Tip articles on our website to know 3 simple ways of paying off credit card debt.
Not all debt is bad. Some debt is good, for example, an affordable house mortgage and education loan. Just make sure the interest rate is fixed, less than 10% and payments are affordable. Remember to shop around for the lowest interest rate and the shortest payback period.
The second floor of your financial house is savings and investment. Save money for two types of expenses. Large one off expenses like vacation, furniture and car. Also save consistently every month for emergencies. Life happens, as they say. Your family, friends and dear relatives will one day need your financial assistance at the most unexpected time.
Invest to improve your lifestyle during your working years and to ensure a good and comfortable retirement. Invest at least 10% of your gross income and save at least 5% for emergencies and large purchases. As a rule of thumb, make sure your investments have a potential of earning more than 10% interest per year and your savings earn at least 4% interest per year to keep up with inflation.
The third floor your financial house is income management. Is income from your investments large enough for you to live on? If the other floors are taken care of and your income from investments can meet all your living expenses, then your house is complete. You are financially independent. You can stop working for money and start enjoying life.
If your answer is no, then pull up your sleeves and get to work. Be creative and use your talents to boost your income. You have a deadline to beat. It is called retirement day. It is the day you will wake up to face your financial independence number, eyeball to eyeball. We hope it will be a day of celebration and jubilation.
Do you need help building any of the floors? Please send your comments, questions and requests by email. We will be happy to direct you on the right track. END.
HOMEWORK NUMBER 4 is Fix your wealth-building plan
These articles are intended for educational purposes only. Please seek professional advice on tax, accounting, investment, legal and similar matters. Each case requires personalized assessment with regard to individual preference and local laws.
?? George Chege Secure Wealth Plan Article June 2008
???If you know where you are going, any road will take you there. If you do not know where you are going, no road will take you there???, said a wise person. This quote is very relevant to your quest for wealth and financial independence. If you know where you are headed to financially, then you will be able to answer questions like the following; ???What is your FIN, I mean Financial independency Number? ???Do you know how much you need to invest today so that you can retire to a lifestyle equal or meliorate than what you presently have? ???Do you have a wealth scheme that will protect you and your family should the storm of peril snipe in the in-between of the night?
If you are not sure where you stand, this article is what the doctor orderly for you. It will show you how to develop a sound wealth plan and seal gaping holes in your stream plan. At least you will be sure of where to start.
There are 3 basic components of a wealth plan. Where you want to go, where you are today and what you need to do.
Why is it important to have a wealth building plan in the first place? If you live to a ripe old age, as we all wish, a time will come when you will be either too old or too sick to work on a full time basis. However, you will still need to pay for animation expenses and for other activities that will fill your time. Healthcare, travel and insurances will be significant expenses in your budget. It is for these reasons that you will need a reasonable, unwavering and reliable reference of income to enable you maintain an enjoyable lifestyle during your retirement years.
1) Where do you want to go?
There are 2 places you ought to be thinking about, before retirement and during retirement. It is easier to plan about ahead retirement because you know your current financial situation, earning ability and preferred lifestyle. For example, if you want to live in the greener neck of your woods, it is easy for you to determine how much income you require to afford a lifestyle similar to the Joneses who live on the greener, quieter and safer side of town. It is also easy for you to decide how to increment your income. Whether you need to do extra shifts or a side job or go back to cultivate or start a home business.
It is the during retirement part that most people ignore. Yet it is a very important 25 to 35 years of your life. Thanks to discoveries in science and medicine, people are expected live longer during retirement. What lifestyle do you want to have for 25 years when your regular paycheck dries out? It depends on you. It also depends altogether on how you clothe your money many years before you retire. It depends on the dollars you invest before retirement.
Let me give you a clue. Joe is 65 years old and will retire at the end of this year. His financial Independence turn is 1.2 million and it equals the value of his investments. Joe expects to spend $50,000 every year for the next 35 years till age 100. He therefore needs to invest the $1.2 million in an pastime earning account that will give him at least 5% interest per year during his retirement.
Is $50,000 per year good enough for Joe? That is up to Joe to determine. More importantly, what is your FIN? I mean your financial Independence Number? This is the magic list that will ascertain how good your retreat lifestyle will be.
2) Where are you today?
If you are like absolute majority of the people, you are only 80% sure of your financial situation. You have no idea what 20% of your money is spent on. The 20% is a very important portion of your financial status but it is made up of seemingly small minutes that you incur repeatedly without much thought. This will affect your financial well being in the long run.
The average someone retiring this year has only $25,000 saved for retirement. If an average retiree is honest with you, he will rustling in your ears that it is those small expenses that are the culprit of his regrettable financial status. It is these expenses he ignored to control that put him in the red.
Let us briefly check where you stand. If your answer is yes to all the chase questions, you are on safe ground. ???Do you invest consistently at least 10% of your gross income every month for your retirement? ???Do you save 5% of your gross income every month for emergencies and large purchases? ???Do you have less than 4 credit cards that you pay off in full every month? ???Do you use credit entry only for expenditures that will improve your financial position e.g. education, mortgage finance or business? ???Do you have these necessary insurances: medical, motor, property, disability, term life insurance and personal liability umbrella insurance?
3) What do you need to do?
Creating wealth can be equated to building a house with a foundation and 3 floors.
The most important structure is the foundation. Unfortunately this is the most overlooked part when people start to build their financial house. We call this foundation insurance. The value of a good foot is known when sudden violent storms blow and the house is able to withstand and continue intact. A house built without a instauration cannot withstand a big storm. It is blown away and the efforts of the builder are wasted. Make sure your requisite insurances are in place to endure the storm of financial misfortune.
The first floor is debt management. Avoid credit card debt like the plague. Do not use credit to pay for luxury items, utilities and fun activities. Use cash or debit cards. If you use accredit cards to pay for these expenses, then pay off the balance at the end of the month. Interest rates and numerous fees charged by acknowledgment card companies are too expensive and will strip you money to invest. Read Money Tip articles on our website to know 3 simple ways of paying off credit card debt.
Not all debt is bad. Some debt is good, for example, an affordable house mortgage and education loan. Just make sure the involvement rate is fixed, less than 10% and payments are affordable. Remember to shop about for the lowest interest rate and the shortest payback period.
The second base floor of your financial house is savings and investment. Save money for two types of expenses. Large one off expenses like vacation, furniture and car. Also save consistently every month for emergencies. Life happens, as they say. Your family, friends and dear relatives will one day need your financial assistance at the most unexpected time.
Invest to improve your lifestyle during your working years and to secure a good and comfortable retirement. Invest at least 10% of your gross income and save at least 5% for emergencies and large purchases. As a rule of thumb, make sure your investments have a potential of earning more than 10% interest per year and your savings earn at least 4% interest per year to keep up with inflation.
The third floor your fiscal house is income management. Is income from your investments large enough for you to live on? If the other floors are taken care of and your income from investments can meet all your living expenses, then your house is complete. You are financially independent. You can stop working for money and start enjoying life.
If your answer is no, then pull up your sleeves and get to work. Be creative and use your talents to boost your income. You have a deadline to beat. It is called retirement day. It is the day you will wake up to face your financial independence number, eyeball to eyeball. We hope it will be a day of celebration and jubilation.
Do you need help building any of the floors? Please send your comments, questions and requests by email. We will be happy to direct you on the right track. END.
HOMEWORK NUMBER 4 is Fix your wealth-building plan
These articles are intended for educational purposes only. Please seek professional advice on tax, accounting, investment, legal and exchangeable matters. Each case requires individualised assessment with consider to individual preference and local laws.
?? George Chege strong Wealth Plan Article June 2008