A strong financial plan should be able to weather all storms of life.
During the highs and lows of our personal, community and work/business financial lives, we should have an even keel in how we approach our finances.
A well laid out financial plan not only gives you peace of mind, but it liberates you to enjoy life better. It also enables the community to build sustainable wealth for ourselves and for future generations.
It gives you a feeling of being proactive which frees your mind to perform much better in all areas of your life.
This is a proven system recommended by many financial planners. Please follow it, share with your friends and families to do the same. By so doing, we will build sustainable wealth and leave great systems in place for our kids and our kids’ kids.
Let’s jump right into them, please follow the right order one step at a time.
1. Mindset–This is the biggest step. If you want to succeed in having a strong bullet proof financial plan, please be ready to
learn from a time tested system. Open up your mind and be willing to change for the better. Read and take action, please don’t procrastinate!
2. Budget–Write down exactly how much you earn and how much you spend. Before embarking on any journey, you have to know exactly where
you stand at the moment before charting your path to your destination. The same applies to budgeting. If you find yourself having more month at the end of the money, look to increasing your income and/or reducing your expenses.
3. Financial Security–A strong financial plan starts with building a strong foundation. Make sure you have in place health, life and disability insurance. If over the age of 50, this is the best time to also look into getting some long-term care insurance in place. For those 65+ please get a Medicare advantage or a Medicare supplement plan. The default Medicare plan that automatically kicks in when you turn 65, has a lot of holes that can be filled with either of the two above.
The reason this step matters a lot is because all the investments you make are all for naught if you were to a serious illness or death. You’d have to liquidate them at fire sale prices which beats the original intended purpose of long-term wealth accumulation. For life insurance, please get a plan that comes with living benefits meaning you can claim on it in case of a chronic, critical or terminal illness. The cash is sent directly to you to cover your living expenses when you are not able to work.
4. Emergency fund–Once the security is in place, this is the time you set a side 6 to 12 months of your living expenses. Have the funds in a savings or money market account where you don’t have
daily easy access but the account is liquid enough to be accessed within 24 hours without a penalty.
5. Pay off debts–This is point where you attack all your debts such as credit cards, car notes, phone financing, student loans, etc. There are 2 schools of thought here:-
I. Pay the minimum monthly payment on all debts then put more towards the lower balance debts and create a snowball effect.
II. Pay the minimum monthly payment on all debts then put more towards the higher interest rate debts.
Whichever one you chose, get down to business and stick to your guns! Once you get all the debts paid, go to the next step.
6. Max out contributions to qualified plans as you embark on creating a strong financial retirement- These include tax advantaged instruments.
Start with taking advantage of your full employer match. Then get yourself some IRAs, SEP etc.
7. Save for college if you have kids. Use either 529 Plans, or BYOB(Not what you think)-Be Your Own Bank. This is where your funds grow tax free and can be accessed tax free
for any purpose including kids’ education costs.
8. Speculation–Once you have done all the above, now you can look into playing around with money with higher risk instruments. This includes daytrading, bitcoin, individual stocks trying to time the market, land etc
The biggest issue I see is people buying land for speculation before getting an insurance plan. Or saving for college before starting a retirement plan. Or buying bitcoins before setting up an emergency fund.
This is like building a house without a foundation and furnishing it with very expensive furniture and appliances, guess what happens when a strong storm comes, yap you guessed
it right, the house comes down like a house of cards.
Please follow these steps recommended by many financial planners and by so doing build a strong household, community and nation!
Patrick Nganga is a licensed insurance advisor based in Dallas, TX. He has been helping families and small businesses have financial peace of mind since 2004.
He specializes in health insurance both under Obamacare and private plans, Medicare, Long-Term Care and Life Insurance.
He can be reached at 405-361-5391 or firstname.lastname@example.org
Patrick Nganga is a freelance Contributor
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