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Strike a friendship bond with your financial fears!

If an entrepreneur/ business owner fears too much, he won’t take the required positive actions, and would pile on regret in the hindsight. When opportunities are presented, he will shun them for fear of the potential dangers and downsides, writes Sandi Saksena.

AOne should never underestimate the power and impact of their financial decisions as a retirement portfolio needs to be structured in a way that delivers reasonable returns and ensures people don’t outlive their money.

“If a person gets his attitude toward money straight, it will help straighten out almost every other area in his life,” quoted  Billy Graham.

The choices one makes in life directly have an impact on whether a person/business would succeed or fail, and these decisions do not escape your financial health. Some of the places it could bring a deep cut is your marriage, strained relationships with business partners/investors/clients, and overall happiness in a broader view.

To begin with, we all spend a considerable portion of our time and a great deal of energy earning money. However, many of us are ambivalent and have never seriously evaluated our attitude towards money and financial planning. As a consequence, we often possess erroneous and harmful attitudes that hinder our financial success and peace of mind. Thousands of interviews with clients over 17 years as a professional financial planner brought to fore bizarre excuses people make for lack of having a plan in place. Sample a few:

• We should leave it all to luck or fate.

• ‘Spiritualize’ this passivity to justify their lack of financial discipline, planning, and savings by claiming that if it in their destiny to succeed, they will wake up one day and find that they have supernaturally acquired financial independence.

• Prudent planning is unnecessary because “God will provide.”

• Money isn’t everything, money can’t buy happiness.

Would it surprise you to know that in your average working life, you will earn a considerable fortune far more than  US$8 million?

However, the correct question one should pose is: what are you doing with this astonishing opportunity to achieve financial stability?  How much of this fortune will you retain to invest and use to provide income for your future?

The fact is that the vast majority of people will neither plan nor arrange their financial affairs to achieve the financial success that is clearly within their grasp.  It is not what you earn, but what you save and invest that will produce financial success or failure. Financial independence can be defined as accumulating an amount of invested capital that will produce a stream of guaranteed income to meet your financial needs without your needing to work or earn a salary.

It is a practical goal that can be achieved if you apply some fundamental principles of finance and work consistently toward your goal. There are simple strategies to build your investments as well as preserve and protect yourself and your family against the special financial risks in this new millennium.

Most of us have had the experience of trying and failing to develop a workable budget and savings plan. We pay our bills and living expenses, hoping to save some money out of the surplus that may be left at the end of the month. Many believe the solution to this dilemma is to increase their income.

The practical solution is to change our entire saving strategy. The principle is simple and fundamental Pay yourself First.

First deposit 10% of your monthly income into an account or a regular savings and investment plan then pay your outstanding bills and living expenses out of the remaining 90 percent of  your funds.

If you are now living hopelessly from ‘what I get every month’, this simple but profound change in your saving and spending strategy will mark the first step on your long but effective road toward financial stability.

Excuses: I cannot afford to save 10 percent of my income because I’m too deeply in debt? If you cannot commit to save 10 percent of your income today, then begin at 5% and gradually increase  the percentage.

The key is to begin today. You cannot afford to delay beginning your savings plan no matter how deeply you are mired in debt. The best way to end your financial bondage to debt is to take control of your finances by beginning your new savings strategy today. There is no better time.  Promise yourself that you will begin today to follow a plan that will lead you and your family to financial freedom. Instead of working just to pay your bills and service your debt, you  will begin working for your financial freedom.

Your ability to achieve financial goals is not controlled by outside forces or circumstances. Other people or the economy can affect your economic life only in a relatively minor and temporary manner.  You are the only one who can affect uour life in a major way. You can improve your own financial future by changing your attitudes, goals and actions.

Your attitude should be characterised by a strong desire to succeed, a willingness to overcome obstacles, and an ability to continually analyse your plans and their results.

Take control of your money by setting definite financial goals, that are high enough to motivate you and but they must also be realistic enough so that you truly believe that they are attainable. Follow through with a set of balanced financial strategies based on a sound analysis of the special risks and opportunities in today’s economy.

Ask yourself, “If I achieve the same financial results in the next five years as I have during the past five years, will I be satisfied?”

If your answer to this question is no, you need to make a commitment today to changing your financial strategy. Most people who fail economically have inadequate and vague financial goals that are not committed to paper.

Setting goals is vital if you seriously want to succeed financially. If you aim at nothing, you achieve nothing. Financial success can be described as the progressive realization over  time of your own predetermined financial goals.

Studies in various parts of the world reveal that 27% of people have no financial goals at all and usually arrive at retirement headed to penury with less than $25,000 in net assets and a meager government pension. Almost 60% of people have only the vaguest of financial goals, they will barely survive with modest personal assets of $50,000 plus a government pension. And 10% have financial goals but never put them in writing. However, those who have unwritten goals still accumulate an average of $250,000 by age sixty-five, more than ten times the retirement assets of those who have no goals at all!

Finally, these studies reveal that only a meager 3% have clearly defined and written financial goals. This small but select group with written financial goals accumulated considerably more than one million dollars in personal assets at retirement!

The bottom line: If you are  not setting financial goals to succeed, then you are effectively planning for financial failure. The choice is yours:

Goals 

Short term – less than a year

Intermediate – two to three years

Long term – five to ten years

Your categories  

Financial: savings and asset buildup, debt reduction and income objectives.

Personal: vacations, education and health recreation.

Material: home improvement, car, electronics.

If you are married, establish meaningful financial and life goals at least annually, with your spouse. Do not avoid insurance planning and the preparing of your will.

Wills and insurance policies are financial tools to protect your family in the event of a premature death or disability that will destroy your ability to provide an essential monthly income for your family. Since none of us have a lease on life, we need to make provision for the possibility that we may not live or work long enough to accumulate enough assets to provide a guaranteed income to make our families financially secure. Insurance policies provide a guaranteed income. If you fail to provide legal and financial instruction for the distribution of your estate to your beneficiaries in your will, then the government will step in to redistribute your assets according to their own rigid legal formula. As a responsible person, you need to create a will for yourself self and your spouse. Keep a goals and objectives book and record the accomplishments you made during the past year. Review, discuss and outline your new goals and objectives for the year to come based on your actual accomplishments to your written goals from twelve months earlier.

The annual review process will motivate you to continue the financial discipline necessary to achieve financial independence. As we step into the New Year, I strongly suggest you do a financial review of your goals and last year’s results. You and your spouse should ask yourselves three basic questions during your year-end summary:

  1. Have we succeeded in saving anything significant during the last year?
  2. Have we succeeded in paying off a significant portion of our debts?
  3. How does our Financial Balance Sheet regarding our net worth compare to last year?

Most people imagine that financially successful people live a life of indulgent wealth.

The Millionaire Mind by Dr. Tom Stanley reveals that the vast majority of American millionaires lived quiet conservative lives that were typified by high-quality houses, cars, and vacations that were far less costly than these people can actually afford. They quietly and unobtrusively accumulated a fortune by living a lifestyle that cost far less than they could actually afford. This enabled them to build a solid financial base that would support their future life. These truly wealthy individuals are characterized by high income, little or no debt, and very high net worth.

This principle applies to all, anyone living beyond their means needs to examine their financial status and be honest with themselves about what they can afford. Be bold and honest to admit to family and friends that you need to “downsize” your lifestyle to minimize debt and to gain control of your life financially this is essential to gain control of your life and begin the process of financial healing.

Financial goals are just wishes unless you write them down. When you write out your goals, you psychologically commit to them as something that you are prepared to devote serious effort to accomplish. It is interesting to note that you cannot find a single financially independent and successful person who is weak, indecisive or lazy.

About sandi_saksena

Sandi Saksena is a financial planning counsellor with over 15 years experience in advising on life, disability and critical illness insurances. She focuses on exit planning for SME owners, working with accountants and lawyers to provide holistic solutions. Sandi can be contacted by email ([email protected]) or by mobile (0506517963).

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