Simple Steps to Financial Freedom

Almost everyone would like to financial freedom. The million dollar question, pun intended, is how?

I’m a firm believer of understanding the WHY first and then the how will follow.

Why set financial goals? Goals give direction to our lives. If you are married, then share your financial goals with each other. It will help you to manage expectations, time commitments and reduces conflicts. You may want to save up to buy a home and didn’t know your spouse want a long oversea vacation, it will create unnecessary tension.

Most of us make plans at the beginning of the year. Yet many fail to follow up simply because they don’t take the necessary steps to make it happen. Here are the steps.

1. Choose something that inspires you

Choose something that is important to you. It will keep you motivated to follow through. Don’t choose something just because of someone else’s suggestion. Remember it is your life.

2. State the goal in the positive

For example, I want to buy a property, is a positive goal. I will not spend money is a negative goal. Why state goals in the positive? The mind does not and cannot register a negative.

Try this. Don’t think of a pink dog. What happened? I bet you just pictured a pink dog in your mind.

3. Set a date for achieving the goal

A goal is only a wish until you set a date. So now, I want to own a property by December 2005 is a real goal. Without a deadline, chances are, it will not happen.

Do not worry about missing a deadline. So what if you miss it. If you aim for the star and you missed, you will still hit the moon. If you aim for the moon, if you missed, you may hit the roof. So aim high.

4. Write it down

Write down your goal and put it up where you can see it daily. Look at your goal list daily until you begin to expect it. Most of us have too much on our minds that we tend to forget the important things. By the time December comes, we wonder what happen to our goals and start again only to fail. This is what I call the “New Year Resolution Syndrome”

Put up the list in places you will see daily like on the computer monitor, mirror, in the car, in your wallet etc.

5. Take action and stay focussed

If you goal is to buy a property, start by looking for locations you like. Check out the prices. Call the real estate agents and visit some property. Stay focussed on your goal and you will find it easy to put aside money to reach it. You will start thinking that I’m saving up to spend on something special.

6. Review your goal

Set up a time frame to review your goals. Check to see if you are getting closer. If not, try to catch up by putting aside less important activities. You may also want to try a different approach. Get the help of your spouse or close friends to help you stay on track.

These steps will help with any goal. It may be to lose weight, get out of debt, save up for your children’s education funds or start a new business.

Take the first step towards your financial goals today.

Financial Planning - 10 Reasons Why You Need It

If our grandparents and parent didn’t need financial planning, why do we? Well, 20 to 30 years ago, the lifestyle is very different compared to now. The world has changed tremendously and so has our lifestyle. See if you recognize these trends and how it affects you?

1. You are going to live longer

Life expectancy worldwide is increasing. Due to improvements in healthcare today, a baby boy born in 2004 is expected to have a life expectancy of 74 and a girl, 79 years or higher (depending on country)

2. You will spend more on healthcare

As you live longer, the total cost of medical care over your lifetime will also be more. Diseases that probably killed a person are now treatable but expensive. You also need to plan for long term care after retirement.

3. To enjoy retirement

You will retire longer. If you and your spouse retire at 55 and live to 75, you’re going to eat 43,800 meals in retirement. Excluding inflation, if each meal costs 5, you’ll spend 438,000 on food alone.

4. You have more ways to spend your money

Not too long ago, there were no theme parks, satellite television, home theater systems, mobile phones, PDA’s, play-station, private medical care, internet, shopping malls, designer coffee, tolls, etc. to drain our income.

5. You travel a lot more.

You spend more on travel than you used to for common activities like work, shopping and schooling. It is very common to travel 30 miles or more in a single day. With increases in fuel price, your budget for travel will shoot up

6. You will marry later and have children later

Nowadays, it is very common to see retirees with children still studying. You have to build an education fund to cater after you no longer earn an income.

7. Costs of raising children is higher

Cost of raising children will rise. Children clothes, food and medical care cost more than adults. You also pay for music classes, ballet class, children camp, language development, tuition, and more.

8. Your children will spend more time in university

10 to 15 years ago, a diploma is sufficient to get a good start. Today many continue on for their Masters’ degree or even Phd. Instead of starting work at 22 or 24, you will have to pay for food, lodging, travel and study fees for a longer period.

9. Inflation

Inflation raises the cost of products and services. You may outlive your money, if your investments do not grow at least at par with it.

10. To pass wealth to the next generation

This is increasingly difficult because it is likely that you will outlive your assets and have nothing to leave to your children. In many cases, the transfer of wealth is going backwards.

It is for all these reasons that you need to have a financial plan. The earlier you start, the easier it is.

7 Ways To Have More Money

I know of a couple, with a combined take home pay of almost 8,000 a month. But this couple barely have any savings at the end of each month! And I wondered how can that be? Asking them further, I found that their expenses on some items are much higher and I thought that if they can cut back or made better decisions,
they would not be in the mess they are in not.

Here are some common expenses that I think would drain our income if we are not careful and I’ve listed them here.

1. Transportation. Yes we need transportation to get about, but a car might not be the best way to do it. Cars cost a lot to buy and to maintain. They also depreciate like there is no tomorrow.

To check if your cars are costing you too much hard earned cash, total up your car expenses in a month and compared to other expenses. Find out the percentage of car expenses versus other expenses. If it is way to high, then it is time to cut back.

Tip - If you can, delay buying a car as much as possible. If you really need a car, try to just have one for the family. Avoid have several of them as much as possible. If you really must own a car, see the next point.

2. Buy a used car. If you really need a car consider a used car. A 1 or 2 year old model would have depreciated some 30% or more off the new car prices. Down payment, installment payment, and insurance premiums will also be much lower. Choose wisely for model that is cheap to run.

3. Think Before You Subscribe. Nowadays, there are many promotions for various memberships and services. They tempt people to join with zero or low entry cost to join. For example gym or health club memberships. Many sign up for yearly subscription and don’t bother to use the membership after several months. Instead, sign up for a short a period to try and see if you would really use the facilities before signing up for a longer period.

4. Reduce mobile phone charges. Unless your company pays for the bills, mobile phone expenses can quickly escalate. I’ve seen office based people who do not do any sales or marketing, that requires them to call using their handphones, have mobile phone bills higher than my friends who are in sales!! If you cannot control your phone calls, try a prepaid service rather than a post-paid service because everytime you take out money to reload, you’ll feel the pinch.

Today, mobile phone companies come up with various ways to get you to spend more with musical ring tones, news downloads and sports update. These fancy services increases your mobile phone bills too.

5. Shop online. You can get most things from online and get a good bargain. Many online shops keep cost low by having low rental and advertising cost, but check the mailing charges.

6. Do your shopping off season. In many instances, when you are buying things at the end of season or clearance sale, you can get very good discounts.

7. Turn your hobby into a business. Almost everyone have a hobby or specialized knowledge of a topic. Be creative and turn it into an income source. If you are good with a computer or software, start a related part time business. You can help to repair, trouble shoot and maintain computers.

The bottom line is this. It’s Not What You Make, It’s What You Spend.