10 Steps for Taking Control of Your Financial Security
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Financial security is the peace of mind that comes with knowing that you can meet your needs, pay your bills, and live a full, happy life. It means having confidence that when bad things happen, you can handle it with relative ease and recover quickly.
In order to achieve financial security, you must take control.
You must make your finances a priority.
You must intentionally set aside time to oversee your finances.
You must mindfully cultivate healthy money habits.
You must educate yourself—arm yourself with information. You must learn from and imitate those more successful than you, and learn from and avoid the mistakes of those less successful than you. You must take independent, proactive steps towards managing your money and achieving your goals.
You must do this, because if you do nothing, you will have nothing.
What are the steps for taking control of your money?
Step #1 — Have your own income. Get a job, start a blog, start a business, babysit, sell Avon, write a book, or sing at the bar on the weekends etc. I don’t care what you do, just find a way to earn your own money, even if it’s just a little bit. Never allow yourself to become wholly dependent on your parents, children, or spouse.
The reason for this isn’t just about money. It’s also about socializing, networking, building/maintaining a positive self-esteem, and exposing yourself to new opportunities.
Step #2 — Budget. Budgets are necessity whether you like them or not. You need to know what’s coming in and what’s going out. Budgets are a tool to help you live within your means and reach your financial goals. Your attitude toward budgets should be that they are freeing not restricting.
If you feel restricted it is not because of your budget; it is because of your means—your income and your earning potential. If you don’t want to feel restricted then you need to increase your earning potential and respect your budget.
Step #3 — There is a difference between happiness and pleasure—meditate upon this. What do you really want to do with your life? What do hope to get out of life? How much money do you need in order to be happy? Be honest with yourself. Don’t be overly modest and underestimate how much you need and don’t be overly gluttonous and overestimate how much you need. For me, I think a household income of $100,000/year would be enough to make me happy. I would certainly prefer even more than that, but like I said, there is a difference between happiness and pleasure.
Step #4 — Look for ways to increase your earning potential. Go back to school, learn a new skill, take some calculated risks, research additional income streams etc. Financial security isn’t just about being frugal or managing your money well, it’s also about being resourceful and employable.
Step #5 — Read! There is no better way to invest your time than by educating yourself about personal finance and wealth building. To quote Wallace D. Wattles, “The science of getting rich… is the noblest and most necessary of all studies.”
You should make it a point to stay informed about money and finances. If you don’t like to read or don’t have the time, then audio books and podcasts are an alternative.
Step #6 — Pay Yourself First! This is not negotiable. No one is going to take care of you but you. The only way to ensure financial security is by saving money for your own benefit—for your own future. 20%—minimum. Treat it like a bill—your most important bill. 20% of you total gross income is the amount of money that you owe to yourself. 10% in a tax-deferred account and 10% outside of it.
If you make it a priority, then one day soon, you’ll be able to afford to save 20% or even more. It will require discipline, but you can do it. If you really want to be financially secure, you cannot settle for less than 20%. Make it a point to achieve a savings goal of 20%. Many financial advisors recommend even more, some as much as 50%. Be brave. Be aggressive.
Are you shocked? Don’t be. If you honestly can’t afford to save that much, that’s okay. Start where you are, anything is better than nothing.
You should at the absolute very least, be saving the minimum required to take full advantage of your employer’s retirement savings match. If you’re not doing this, then you’re missing out on free money! If you don’t know whether or not a matching program is offered by your employer then stop what you’re doing right now, call human resources, and educate yourself. If you employer doesn’t offer a retirement savings match, then might want to consider a new a employer.
Step #7 — Pay your bills on time and pay them in full. This will save you money, help you keep things under control, give you a feeling of security, and help you build and maintain a good credit score.
I like to pay my bills as soon as they come in, that way I don’t risk forgetting about or overlooking them. I’ve also created a Google calendar specifically for our bills and expenses and another for our income. I use the DigiCal+ app on my smartphone and I’ve set expenses to appear in red and income to appear in green. I have the calendar set to remind me to pay my bills as soon they drop as opposed to on the due date.
You could also consider arranging to have your bills automatically. Almost all reoccurring bills offer this as a convenience. The trouble with automating your bills is ensuring that you enough money in your bank account to cover the expense. Also, removing yourself from the bill pay process could result in your becoming complacent. You cannot afford to become complacent with your finances.
Step #8 — Eradicate High-Interest Debt. Unless you have a terminal illness, you have no excuse to possess high-interest debt. Get rid of it now! Pay it off if you can, transfer it if you have to. Get a zero-percent interest credit card, take a second mortgage, or swallow your pride and hit up your parents for a loan. Get a job, get two jobs, get four, sell your crap, sell your body—whatever you have to do, just do it.
Step #9 — Plan Ahead and Save Early for Big Expenses. If you know what your big expenses will be, then you can start saving for them now. It doesn’t matter if they’re 5 years away or 50 years away, if you know now, you can save now. Even if you don’t know exactly when your big expenses will take place, if you’re expecting them, then you should save for them.
Do you want a new car? A wedding? A house? Early retirement? Or maybe you’re still building your emergency fund? Either way, open an account and start saving today!
Even if you can only set aside $10, it’s better than nothing. Getting any kind of head start can make a world of difference. The best part is just knowing that you’re taking practical steps toward achieving your goals. Instead of musing about buying a house “someday”, you can be actively saving to buy a house “someday”.
That’s why I love sub-savings accounts! I bank with Capital One 360 and they allow you to have up to 25 sub-savings accounts, each with its own nickname, withdrawal limits, and savings goals. I have several savings accounts, each with its own intention. I have one for emergencies, one for automotive expenses, one for future investments, one for a new computer, and I just started saving for a “someday” move to greener pastures. (I’m thinking Tennessee, near the Appalachian Mountains.)
Capital One 360 offers fair interest rates, no minimums, and managing your accounts via their website and app is extremely easy.
If you’re interested in giving Capital One 360 a try, you can use my referral link to open an account and earn $25*.
*In order to qualify for the $25, you must be a new customer and open the account with a $250 deposit. The $25 is deposited immediately and starts earning interest immediately, but it isn’t available for withdrawal for 30 days.
Just a note—regular savings accounts are for small goals, new goals, or short term goals. You don’t want to keep thousands of dollars stashed away in a savings account. If you have more than a few thousand dollars it’s time to look into alternative investments.
Step #10 — Give back. I strongly encourage giving back and I’ve written several blog posts about just that. But I would never encourage someone to give when they don’t have enough for themselves. You should only give back after you have more than enough and can do so with a truly generous heart.
You have a right to feel secure and you have a right to pursue happiness in your own way.
After you’ve taken care of your own needs, including saving for your future, it’s time to give back. I’ve seen a handful of personal finance advisors encouraging people to give back much sooner and with more generosity, but I do not think it’s prudent to offer to others when you’re own needs aren’t being met.
You don’t have justify yourself and you don’t have to feel guilty. Just know that when you’re finally ready to give back, you’ll be able to do so freely, generously, and with confidence of your own financial security.