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TIPS FOR FINANCIAL
SECURITY
Six
Steps to Personal Financial Independence in 2006
(ARA) – Every New Year’s Day millions of Americans
make resolutions to be more responsible about eating, exercising, smoking,
etc. With the average per person credit card debt in America at $8,562
and total consumer debt topping $1.7 trillion, this New Year consider
committing to financial resolutions by creating a “Declaration of Personal
Financial Independence.” “Many people struggle with living paycheck to
paycheck and getting further into debt each month,” says James E. Stowers,
author of “Yes, You Can … Achieve Financial Independence” and founder
of American Century Investments. “The new year is a time to take a long
look at how you’re spending your time and money, and determine your financial
priorities. Creating and signing your own ‘Declaration of Personal Financial
Independence’ is a great way to put those New Year’s resolutions into
practice.”
Stowers recommends the following six resolutions to help you become financially
independent:
1. Determine To Make a Commitment
Ask yourself this question, “Who will take care of me financially, if
I don’t take care of myself?” Your answer to that question will determine
your financial future. Are you expecting to have enough in your savings
to be independent until the end of your life? Or are you expecting to
be taken care of by the government, a relative or a charity? Can you count
on one of them to be there for you when you retire? The best option is
independence.
2. Identify Your Wants vs. Needs
Most of us have more wants than we have income. By assessing your wants
and needs, you can budget for everyday occurrences and save for the most
important “wants” on your list. Conduct a thorough analysis of your needs
so you know your monthly budget, and then prioritize your wants by what
value they bring to you. You may be surprised by the items that fall to
the bottom of your list.
3. Pay Yourself First (R), Then Forget About It
Before you pay a single monthly bill, including your mortgage, rent or
insurance, pay yourself first. A simple rule of thumb is to have at least
10 percent of your gross income saved and invested for the long term.
Then, fight the temptation to spend any of your savings. Time is your
greatest asset, so the sooner you start saving and the longer you keep
your savings in place, the more financially secure you’ll be in retirement.
4. Practice Responsible Credit Card Use
Change your view on your credit cards and you’ll become a responsible
user. Credit cards provide the convenience of not carrying cash in your
wallet at all times. They shouldn’t be used to buy now and pay much more
and much later. Start imagining cash coming directly out of your pocket
and concentrate on paying down the debt that keeps you a prisoner of your
credit card balances.
5. Prepare for a Financial Emergency
Personal, property or business risks will be a reality for all of us at
some time. If you don’t provide for your emergencies, who will? Life is
full of risks and financial pitfalls. By preparing for those risks now,
you ensure the emergency does not have a profound impact on your lifestyle
and financial goals. First, assess your current personal level of insurance
coverage, evaluating its ability to cover your assets while allowing you
to pay higher deductibles. Then, build an emergency reserve fund based
on three to six months of living expenses. The reserve fund should remain
readily available, safe and income-producing.
6. Get Your Money’s Worth
For at least one month, keep a record of every purchase, listing exactly
the item and the cost. At the end of the month review the list and ask
yourself these two questions:
* Am I getting my money’s worth?
* Am I satisfied with the way I’m spending my money?
If you answer no to either of these two questions, it’s time to reassess
your spending and saving habits. Your goal is to continuously refine the
way you spend money until you are completely comfortable with your habits.
Stowers encourages each of us to create and sign a “Declaration of Personal
Financial Independence” this New Year’s Day.
“You cannot accomplish your goal of achieving financial independence by
wishing. It takes doing. It takes being committed, and signing a ‘Declaration
of Personal Financial Independence’ shows that you are absolutely determined
to act,” says Stowers.
“Yes, You Can . . . Achieve Financial Independence” is available by calling
(800) 234-3445 or online at www.stowers-innovations.com.
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