If the recent economic turmoil has caused you to panic or even abandon your efforts to achieve financial security, you’re missing a golden opportunity to confront the root of your anguish. Now is the perfect time to take an honest look at yourself, examine your spending habits, and address any inability to manage money efficiently.
While the recession has exacerbated many unstable situations, it’s often poor spending habits and a lack of savings that set the stage for financial stress. This emotional turmoil can be avoided through solid financial planning.
Financial planning is more than just investing; it’s about managing your life. It involves identifying your goals and figuring out how to use your financial resources to achieve them.
Regardless of your current situation or how much you earn, you have options. Your financial success—or lack thereof—depends on the choices you make. To improve your chances of a prosperous and successful future, you need to understand not only where you are but also where you want to go and how much time you need to get there. In other words, what is the destiny you are seeking?
HERE’S THE ROAD MAP
Deferred Gratification: This concept is often an afterthought for many of us. We want the good life now without considering the long-term effects of our actions and spending habits. Assume there will be a tomorrow, and take actions today that delay immediate gratification to experience long-term enjoyment and comfort.
Adopt Proper Habits: This familiar adage is worth repeating: “Watch your actions; they become your habits. Watch your habits; they become your character. Watch your character, for it becomes your destiny.” We should adopt the habit of spending wisely, saving, and investing now—habits that will develop the character needed to lead to your ultimate destiny.
Assess Your Finances: Take a hard look at your income and how you currently spend your money. Divide your spending into three categories:
- Income: Salaries, commissions, social security, retirement, and other projected cash receipts.
- Must Expenses: Bills that you must pay each month.
- Desired Expenditures: Purchases that improve your quality of life but aren’t truly necessary.
Ask the Hard Questions: After assessing your financial situation, ask yourself: “How does my income compare to my spending? What am I spending my money on? Am I saving enough? Do I have too much debt or the wrong kind of debt? Am I insured against the risks I face?” Research and compare your spending and debt levels with the recommendations for someone in your income bracket. Then determine what you can realistically achieve. Prepare and execute a written financial plan with that in mind. Commit to being fully prepared to make necessary adjustments to your plan when circumstances change, such as a reduction in income or other unforeseen events.
Invest Smartly: Only after you have your spending under control can you invest for the long term. Conventional wisdom suggests that investors should stay vigilant, be flexible in their thinking, seek objective professional advice, and avoid knee-jerk decisions. The recession has increased our fear and reluctance to invest, but it’s important to remember that investing is crucial for reaching your financial objectives. Don’t hesitate to seek professional advice.
With the right advice and mindset, you stand the best chance of making the financial planning moves necessary to weather this recession and any future economic turmoil.
