9 Do’s on the Road to Financial Freedom

Mon, Jun 14, 2010

True Wealth

After 7 years as a planner helping clients with their financial and insurance needs and a total of 10 years in the industry I have seen first hand how successful people manage their money.  I worked with clients that made $80,000 a year combined income but you would think they made more than double that. I’ve also witnessed the opposite, clients that brought home over $250,000. a year but never had a penny to put aside for their future. These are 9 common habits and characteristics of my most successful clients. Not necessarily the clients that made or had the most money but the most discipline.

1. Do your home work. Study money – Like anything in life if you wish to have some success in an area you need to have some knowledge about that subject. You don’t need to get licensed or take a course but get some foundational understanding of how money works. Just because you earn a paycheck don’t think you automatically know what to do with it. You should do some reading in books and online to understand compounding, the effect of taxes and fees on your investments, Dollar cost averaging etc… some great books to start with are: “Tax-free retirement” by Patrick Kelly, “Payback Time” by Phil Town and “Secrets of a Millionaire Mind” by T. Harv Eker.

I even suggest watching CNBC if only to get familiar with investment language and the current events with certain companies as well as the overall market. Just keep in mind it’s still media with a lot of “OPINION” for entertainment value.

2. Do hire a professional and DO be pickyNot all planners and investment advisors are created equal but you should have one. They are there to help and can ask you questions you didn’t even know needed to be asked so that you reach your goals and avoid some serious and common financial pitfalls. Find three you like and interview them. I recommend you find one that is either independent or has a very open platform rather than someone with an allegiance to a specific company. Most importantly worry about communication. How well they communicate and educate you and how you feel talking with them because it should be a long-term relationship.

3. Do spend less than you make – This might sound obvious and yet few do it now a days. Most people charge way too much! Cut that shit out!

“If you can’t afford it charge it!” That was my personal motto until (even as a financial planner) I found myself in over $60,000.00 of credit card debt. Some ask how the heck did that happen. Well first it can be easier to give advice than take it. There are plenty of Doctors and even heart surgeons that smoke and eat like crap. Second its what I learned growing up and even though I had more knowledge, that’s worthless when not applied. I had to learn for myself by being on the verge of bankruptcy. So the moral of the story is a) live within your means and b) create a “spending” budget – it’s freeing to know where your money is going then you can control and improve the situation and c) always pay as little interest as possible or avoid it completely, you’re supposed to make interest not pay it.

4. Do keep separate accounts for separate purposes and make a “Spending budget” – I Learned an easy money management system from an amazing workshop I went to. Without realizing it I had already been doing something similar. The idea is to use separate accounts for different purposes and put a percentage of your income into each; such as: 50% into your checking account for bills, 10% a short term spending account (play account for entertainment and fun), 10% a giving account, 10% term savings for big ticket items like cars, weddings, homes etc… 10% to your continued education and personal growth; reinvesting in yourself and 10% for your Long financial freedom account.

That might sound crazy at first, you may be saying, “how do I live on 50% of my income?” It may not be something you can do over night but realistically financial advisors recommend you live on a maximum of 70% of your current income, 30% should be reserved for investing, saving, giving, vacations, etc… This practice along with a spending budget which is a list and clear breakdown of where your money is being spent each month will help you manage the money you already have! And managing the money you already have may be the most important thing you can do; refer to the opening statement above.

The psychology is, “if you cant manage what you have 1. you don’t deserve more and 2. even if you make more money you’ll mis-manage that too!” Change your habits first.

5. Do protect your income while alive and in death – People rarely protect for the “what if’s” in life, it’s never a conversation you want to have but one that is important. Everyone should have disability insurance. If you have a policy at work which I used to hear all the time KNOW HOW IT WORKS! If you have a free policy through your employer it may pay you half of your current earnings for three month Is that enough? Is there an option to increase it for pennies to maybe 60% of your current income for 2 years in the event of a disability? Next have the standard 3 to 6 months of income in a savings account. Yes you’re hearing this AGAIN! Have you done it? I don’t care if you can only do 5$ a week start now, it’s better than nothing! And finally Life insurance. I won’t get into my personal philosophy but usually a combination of term and permanent makes sense; “Term is for temporary needs and Permanent like universal and whole life are for permanent needs.” To find the right amount for your needs do a “Needs based” calculation not just 12 times your income or enough to cover your debt but enough to take care of the what you and your significant other agree to be important. You can pay off the house but can your spouse who has been home for two years taking care of the house now afford the utilities, taxes and child care needs without you there? Would you want to pay for school for your kids? Dtermine what is right for YOU, Your family or your business depending what the policy is for!

6. Do pay yourself first – Cable company is getting rich, so are the car companies, Apple and Verizon and etc… HOW BOUT YOU?

I’m not just talking 401(k)’s here either. Those are great vehicles (sort of), they’re convenient because you get to do direct deposit straight from your check. Also if you get an employer match you MUST contribute at least what they match because it’s free money and that is the #1 rule “Take the free money first”. Lastly you get a discount on your tax liability current year. BUT overall these investment vehicles SUCK!! Tell your friends and your family! Yea I said it, they suck! The fees in the mutual funds are high and that seriously effects the growth, most never perform as good or better than the S&P which means you can just buy a mutual fund or ETF that follows the S&P, spend less on fees and get better growth. In fact 80% will perform worse than the S&P which means you’re paying high fees for crappy returns and ON TOP OF ALL THAT… only GOD knows what taxes will be in the future but the chance of them being lower than today is slim! I rather pay the taxes today, at least I know what I am paying and there is a good chance I’ll pay less! So with that said I don’t care if it’s savings, stocks, ETF’s, a managed investment account or real-estate just take the first 10 to 20% of what you earn and PAY YOURSELF FIRST… you deserve it dammit!

7. Do give your money away – Look, call it tithing, call it good karma but the best receivers are the best givers. When you hoard your money or live in fear that there is never enough, even when things are tight, you tend to stay in that state of mind and attract more of it. When people give they are rewarded. It makes the world a better place and the most Disciplined, Fulfilled & HAPPY and Financially Successful people I know are Generous Givers. I won’t even suggest how much you should give I’ll just say look into your heart and start wherever you can, THEN…add 10% to the number! Always give a little more than you think you can. So if you’re going to give $20 dollars to a friend for a charity walk give $22. And here is one more tip, massive success comes from massive action! Give $100 or $1,000 or $10,000. away then write me three months later and tell me what happened. I can almost guarantee you’ll have a life changing story to tell.

Either way, be it a dollar or ten thousand of them give and give more than you “Think” you can!

8. Do start early as possible and stay the course – There is NO substitute for time. That is pretty much it! Based on the mathematical affect of the time value of money earlier is better and there really is no “catch-up!” Even someone who contributes more in the later years will have less than someone who contributed less but earlier because the money is given more time to grow and compound and as the quote sort of goes, “When Albert Einstein was asked what is the most powerful force in the universe he half jokingly said compounding interest.” Just as important I have seen a lot of people do much harm to their financial futures withdrawing from their long-term investments and savings to buy cars or go on vacation, bad move! Save your money is a separate account and leave those dollars alone!

9. Over “Do” it! – “Shoot for the moon and if you miss you’ll at least be amongst the stars.” The way T. Harv Eker puts it is,

“if your goal is to be comfortable chances are you’ll never get rich but if your goal is to get rich chances are you’ll end up mighty comfortable.”

There is no telling what health care will cost, if there will be any social security, what inflation and taxes will be and so on. A lot of what I hear and read is if you want to maintain and similar lifestyle in the future that you enjoy today and your income is $80,000. to $100,000. a year than you will need a nest egg of approximately $3million dollars at least.

I’m not here to alarm you. Even if you don’t make too much money or are far behind the number above is doable, not as big and scary as some may think and it may not be YOUR number but if you follow these rules you’ll get where you need to go…trust me.

I hope you found this valuable or have questions to ask and points to add I would love to hear your thoughts so please post your comments below and share this post if you found it helpful. Tweet, Facebook, Stumble, Buzz, Digg etc… till your hearts content:) Your visit, comments and sharing is tremendously appreciated! Thank you.

Wishing you much Peace & Prosperity,

Dallas Cyr

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5 Responses to “9 Do’s on the Road to Financial Freedom”

  1. Matt Feato Says:

    Nicely done. But we all know money isn’t “real” anyway…lol.

    I was guilty too…but slowly getting better. There’s some kickass passive investment groups out there that you can come across if you study, read, learn, and ask. You won’t find them on CNBC…

  2. Chris Says:

    Dallas i agree but all the money you safe you must protect your assets from car accidents and or any other accidents so look at an UMBRELLA policy it can save you to learn more go to http://www.paradisoinsurance.com or call us at 860-684-5270 Thanks Chris Paradiso

  3. Dallas Cyr Says:

    Chris, I agree and I’ll let the “commercial” slide cause its you buddy; ) hope all is well!

  4. software development Says:

    Great information you have also managed to get some good content and useful information on your blogsite. bookmarking your blogsite on delicious

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