You don’t need to be a multibagillionaire to live a rich life.
I have found that if you have a personal financial plan in place, and you follow that plan, you can feel rich and live a rich life.
When you know that your finances are automated and your savings plans are being executed in your sleep (thanks automation!) the burden of financial planning is lifted from your shoulders. The removal of this burden alone can be enough for most people to live a rich life.
Here are 9 essential tips that you can start to implement today to help you live a rich life.
1. Know how you are spending your money
Often the best (and easiest) way to make money is to save money!
Be cognizant and aware of how you are spending your money. A $5 coffee every day, 5 days a week, fifty weeks a year costs you $1,250 per year.
Taking a second, objective, look at where you are spending your money can help you find areas to cut back and end up saving a lot of money!
2. Develop a Realistic Budget
Develop a budget and plan for your expenditures. It is important to be realistic.
If you cannot survive on tuna fish and water alone, then don’t budget it in!
After a month or two, take a second look, and review to adjust the budget accordingly.
3. Pay yourself first – include savings
Make sure to pay yourself first. Take a predetermined percentage of your gross income.
Treat it as if it’s is just another one of the bills you have to pay and pay it first every single month. Why not pay your most important asset, yourself?
It’s amazing how much you can save over time if you’re automatically paying yourself 10%, 20% or move before anything else.
Now, of course, I’m not suggesting that you skip out on paying your rent or mortgage in order to pay yourself first. What I am suggesting is see what areas you can cut back on after you complete steps 1 & 2 in order to be able to pay yourself each and every month.
4. Plan for major purchases – don’t be surprised
If you have a major purchase coming up, budget for it. Trust me, knowing that you have the money in the bank when it comes time to make your big purchase is worth every bit of added stress that saving the extra money each month might bring you.
Bonus points if you’re using a credit card that gives you points and paying off the balance before your payment is due. This is one way to build up your reward points that you can cash in down the road for free travel, gas and other travel rewards.
5. Factoring retirement
Take advantage of compound interest and market upturns by saving for retirement now.
If you have a dollar matching program at work, this is the best and easiest way you can make money. Maximize this, even if it requires sacrifice in other areas. Check with your HR department to see what the details of your retirement benefits are and then maximize it if at all possible.
What I mean is is if your company will match 50% of your contribution up to 6% of your pay, then do everything you can to contribute at least 6% of your pay so you can get that instant 50% bump.
6. Watch your credit score
You should also know that any late payments to your credit card, utility companies, or your lender lenders can affect your credit score in a negative way.
You should also learn how to spot fraud on your credit report and be sure to report any suspicious activity immediately. Keeping your credit score high saves you thousands of dollars in the long run.
If your credit score is low because you have negatives in your credit history, you should consider taking the necessary steps to repair your credit as increasing your credit score can save you a lot of money in interest payments on mortgages and loans in the future.
7. Have an emergency fund
Financial advisers often agree that having six months of living expenses tucked away is an excellent idea. While it may be tempting to spend, and will take time to build up, you will be happy that you did.
FYI: A 5-course dinner or vacation or Amsterdam are NOT emergencies. Vehicle repairs, unexpected home repairs, medical bills, rent or mortgage payments and things of this nature are what you will be using this emergency fund for in the time of financial hardship or during a sabbatical.
8. Get a good accountant
Even if straightforward, having a good accountant will save you far more money than you spend. One word of advice: be organized! The less time your accountant is spent guessing, and more time working on your file, the more you also save.
A continuation of tip number 8. There are online tools as well as the old-fashioned 3-ring binder. However you choose to do it, keep great financial records. It will help both you, and your accountant.