As a financial advisor, I experience highs and lows…and I’m not talking about the stock market. One of the areas I cherish most about what I get to do with my life is seeing people succeed financially and make progress towards their goals. That never gets old, it still fires me up!
But I also encounter many people who struggle financially, far too many. And some of them are good people, so it’s hard for me. The fact is that most of what we know about money is learned from our parents or those closest to us. And that can be good or bad. When I speak with people who are in a bad financial situation, I’ll ask them “How’s your parent’s money situation?” The answer is usually “Oh it’s worse than mine!” Sad. The good news is… that no matter what your financial situation is, you can take control and make positive changes. You’ll be amazed at the changes you can make. You just have to make up your mind to change. If you put a plan in place and take action, imagine where you will be this time next year going into 2021.
I am asked all the time “Erick, I want to improve my finances but how do I do that?” Happy New Year, here you go. If you’re looking to improve your financial situation for 2020 and make lasting change, here are my 5 tips:
- Get a Spending Plan today: Don’t wait until tomorrow when it might be more convenient. Do it now. Have a detailed plan on what you plan to spend your hard-earned money on each month of 2020. Write it out. Use the bills from 2019 as a guide to know what you’re doing now. Don’t guess, this is too important. Write out every single expense and actually know where each dollar is going. You might be surprised at how much in taxes you pay each month (then you can write Gavin Newsom a letter!). Have fun with it. Make believe you are a CSI Agent (you don’t need to wear the uniform but if it helps, go for it!) and you’re investigating a crime. It might feel like a crime when you see where all your hard-earned money goes. Now, once you determine what you spent in 2019, ask yourself if that is what you want to spend in 2020 each month. You control your spending, no one else. Don’t forget that. Track your progress each month and course-correct if need-be. If you get off track one month, don’t give up. It’s ok, keep working at it. Be a good steward of your money and you will be rewarded.
- Action step: Write down where each dollar goes each month.
- Live below your means: Run your car at too high an RPM for too long and you’re going to have problems. It’s the same way with money. You should never be spending 100% (or more) of what you earn. It’ll end badly. Too many people live their life trying to keep up with the Kardashians. As a result, they have debt and live stressed out. Yes, I know living in California is expensive (and wonderful!) so you need to figure this out. Others have, so can you. I can tell you countless stories of people that have done this in tough situations so there’s no excuse. When your “Why” in life is strong, you’ll figure out the “How”. Save 20% of your paycheck (10% to Emergency Fund and 10% to Retirement). If you can’t do 20% right now, start with $25 per month. That might only be 1% of your check but it’s a start. Set a goal to move that to 2% in 2 months. Then increase that 1% every 2 months. But start saving today! Once you get those 2 accounts funded, there’s only one more account you need to get really financially strong. Reach out to me when you’ve done that and I’ll help. Let’s keep it simple for now. Stay focused.
- Action step: Increase your saving 1% this month.
- Get out of debt: That’s right, no more carrying debt month-to-month. Too many families have credit card debt and car payments. Tip: Stop paying interest on depreciating assets. It’s alarming how many people spend more on servicing their debt each month than they save. That will never work long-term. Debt is robbing your present and your future. Get completely focused on getting out of debt in the next 4 months. There are 2 main strategies for debt elimination and they both work. If you need help, Google it or give me a holler. But get out of debt now.
- Action step: Write a clear plan to get out of debt in a specific amount of time. Then cut the time in half.
- Invest in you: I love investing. The best investments you’ll ever make are not the stocks, bonds, mutual funds, real estate, etc. but in YOU. Go read a book, take a class, attend a seminar or workshop and… grow. This knowledge is something that can never be taken away from you. You’ll always have it. Set a goal to be a better version of you in 2020. Take what you learn and execute it in your life. Take notes in a journal on how it went. You’ll look back and see all this progress and you’ll feel like Wonder Woman! Rinse, repeat. That will pay dividends in your life like nothing else. You might have heard the expression “the best earners are the best learners”. It’s true, I’ve seen that firsthand in my life. Be a learner in 2020 and you’ll see your financial life improve.
- Action step: Start and finish a book this week.
- Learn about money: I’ve spoken to thousands of people over the years and I am disappointed to see how little people know about money. They know so much about their sports team or favorite celeb but little about money. If you don’t understand money, you are going to struggle. Period. So pick up a book and start reading. Read a book on money each quarter (see #4 above) and you’ll be simply stunned about where you’ll be in 2021. I think everyone should work with a trusted financial advisor. A good financial advisor will teach you. I encourage my clients to read and learn. That only makes them better clients and working together we can get even more accomplished.
- Action step: Write down the names of the top 6 finance books of all time and go to your local wonderful library and get one. Dive in and enjoy!
BONUS TIP: Be generous. Bring 6 cans to the food pantry (they need it), give to your church, tip that waitress or barista that is working hard. If you don’t have money right now, give your time and a smile but be generous and be present in that moment of generosity. You can’t help but feel great. And if someone is generous with you, don’t be a stale pond, pay it forward. And wouldn’t life be a little bit better with more of that floating around.
I pray that 2020 is the most abundant and joyful year of your life!
If I can help you along the way, please reach out. Learn more about how to organize your finances and build a plan.
Next Step: Let's work together to design your plan.
Sources/Disclaimers:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
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