9 Recommendations to Improve Financial Success

1.  Use debt wisely.  This is a critical step to start building wealth. Most high-net-worth individuals do not have a lot of debt on things that depreciate. They use debt wisely to buy things that appreciate. If you have accumulated unwanted debt that has high interest rates, the best place to start to pay down debt is with those high rates on credit cards and loans.  If they can’t be paid in full month to month, always try to pay more than the minimum requirements.  Mortgages should be the last debt to pay down.

2.  Continue Saving.  There is a concept in financial planning called “pay yourself first”, meaning save as much money as possible before paying your bills and allowing the rest to be spent. Budget and live a lifestyle to fatten up your savings account. You can also consider DIY opportunities to help fund your savings.  Savings accounts will also serve as your emergency fund so that a loan (more debt) won’t be necessary when the time comes.  As it grows, your savings will be available for investment opportunities.  

3    Max out your 401k!  Contribute the maximum allowed to your 401K if you can and be sure you are taking advantage of an employer match if it is offered. If you can’t budget to take the max, start with a smaller percentage and build up as you are able.  Create a balance between paying off your debt and contributing towards retirement.

4   Reassess your budget.  Analyze and update your budget regularly.  Lifestyle changes require updates.  A new child or even a pet will alter the budget. Perhaps a new job or career will come into play.  Keep a check on your non-essential expenses. Creating a budget and sticking to it, is a difficult thing to do. There are software programs out there such as Quicken or Mint.com that can help you. For our financial planning clients, we offer access to eMoney which helps create and track budgets as well as do financial planning.

5.  Improve your Credit.  If your credit scores need improvement, here is a good list of how to navigate this process and get started:  https://www.nerdwallet.com/article/finance/raise-credit-score-fast. Having good credit is important because ultimately it will save you money. Banks and lenders almost always charge more to those that don’t lower credit scores. There are many sources now for monitoring your credit. You can go directly to the 3 main credit rating agencies and get a free report. Many bank and credit card companies offer to their customers as well.

6. Consider Consolidating and simplify your IRA’s and 401K’s.  If you have accounts scattered at different companies, it is easy to lose track of them. If you consolidate them, it is easier to keep track of them and how they are doing. It is also easier to monitor your asset allocation and total balances if they are combined or at least at the same brokerage.

7.  Consider seeking a higher paying job, a different career or starting a business.  This is becoming very common at this time.  Obviously, higher pay and better benefits will allow you to change your budget, avoid debt and save/invest more. Starting a business often sounds scary, but is usually easier than you think. It just requires effort, creativity and a sound business model. We have helped many successful entrepreneurs over the years get started and build successful businesses.

8.  Invest in yourself.  In addition to investing your money, invest in yourself through educating yourself about business, taxes, investing and your career field. Most wealthy people got that way through lots of hard work either starting/owning a business or in their career of choice. There are lots of books, articles and videos on how to build wealth. A couple of my favorites are Think and Grow Rich by Napoleon Hill and The Millionaire Next Door by Thomas J. Stanley. 

9. Lower your tax bill.  Do your best to save taxes. There are many ways to save taxes. Understand how to lower your taxable income and increase your tax deductions. Certain investments and types of accounts also have tax advantages. We are big proponents of using retirement accounts to contribute to which also provide tax deductions. This way you take care of two things at once!  Taxes are a very complicated area and consulting a tax professional is almost always a good idea.  Managing your tax picture can often drop your tax bracket to a lower percentage.

If you are dedicated to build wealth and feel overwhelmed or confused or if you are making big lifestyle changes, consider asking for financial advice.  As always, feel free to contact us with any question.