Achieving your long-term financial goals is a lifelong commitment. It requires careful planning and daily decision making in a manner that is consistent with the financial targets you have established.
To stay consistent with your financial goals, consider implementing these five financial strategies that should help you grow your personal balance sheet and ensure your financial security. (For related reading, see: 5 Steps to Getting Started in Investing.)
1. Have an Emergency Fund
Let’s face it, life gets messy, whether it’s the arrival of a large, unexpected medical bill, a temporary job loss, or your air conditioner suddenly quitting in the middle of a hot summer day. To cope with these situations, you should have three to six months of living expenses in cash set aside in a separate account rather than using your credit cards as a crutch.
2. Spend Less Than You Make
This is a simple financial strategy to understand, but it's a difficult one for many of us to implement.
More than 40% of U.S. households routinely carry high interest credit card debt. Early in our marriage, my wife and I made a commitment to discuss all major purchases and to never carry credit card debt. If you currently have such debt, make the commitment to yourself and your spouse or partner to pay it off in the next six to 24 months. Instead, put the money toward your long-term financial goals. (See also: 6 Questions to Ask a Financial Advisor.)
3. Protect Yourself and Your Family
Once you begin accumulating wealth, you need to make sure you have the right kind of insurance protection. Say yes to the kinds of insurance that protect against big losses for a relatively low cost. I protect my wealth and family with inexpensive term life insurance (through when my kids turn 18 years of age), disability insurance and comprehensive personal liability insurance.
I always say no to things like expensive whole life insurance policies and extended warranties on major purchases. I’ll take my chances on a large car repair bill, but protect against the losses that could ruin the long term financial health of my family.
4. Let Go of Negative Money Ideals
Pay attention to how you talk to yourself about money. Many people push wealth away by establishing unproductive money rules for themselves like “I’ll never be wealthy; money just doesn’t run in our family” or “I’ll always be stuck in this low-paying, dead end job.”
Wealthy people have much more productive internal conversations with themselves about money, which in turn translate into the actions that are required to build wealth. For the next 30 days, pay attention to the internal money rules you’ve set for yourself. Make sure they are consistent with acquiring the wealth you desire.
5. Increase Learning to Increase Earnings
Gone are the days that you can get a job out of high school or college and expect to stay with the same employer for your entire career. Many professions have been rendered partially or completely obsolete thanks to technology. I have been continuously “in school” to acquire new or sharpen existing skills for much of the last two decades and have seen this learning directly translate to higher earnings — first with my corporate career, now with my own businesses.
Make a lifelong commitment to learning to ensure you have the skills that employers want or the ability to go it alone with the launch of your own business.