Financial wellness is a lot like personal finance; it’s in the eye of the beholder. You’re financial desires could be focused on accumulating millions, while mine could be focused on finding security and increasing certainty.
One’s idea of being financially well could be fully understanding the investments inside they’re 401(k), while others may be having the ability to read and understand complex financial statements.
With that in mind, what does being financially healthy mean to you? Think about how much you’d need to be earning, the value of your assets, the amount of liabilities, in order to feel like you’re financially healthy.
Does being on course to achieve your desires make you feel healthy? Is there a milestone you’ll need to achieve before you feel that way? What does your ideal financial situation look like? With people going into outer space, not even the sky’s the limit anymore.
Once you get clear on what you want, look at where you are. Now, it’s time to close that gap, and that’s the work to be done. Create a plan and figure out what actions need to be taken to accomplish each of your objectives.
You want to be debt free? Add up your debts, determine how much you can contribute towards it every month, and you’ll be able to put together a plan for how long it will take you to pay off.
Want to retire at 60? Figure out how much you’d like to have, how many years you have to invest, determine an interest rate you’re comfortable with, then start contributing the appropriate amount to your 401(k).
To help, you can access our Goals course at no-cost.
Sounds easy, does hard.
In service of helping you get to where you want to go, here are 9 of the most important financial rules to keep top of mind. I’ve distilled these down over the course of my 20+ year career as a financial advisor.
Let’s get started.
Gold, Silver and Bronze
To make these rules a little stickier, I’ve assigned a value to each of them. For the first three, we’ll use Olympic medals.
- The gold medal of personal finance is “Pay yourself first.”
The majority of Americans don’t do this. We know that’s true because they’re living paycheck-to-paycheck, and not successfully saving money. When you’re in the habit of paying everyone else first, and waiting until the end of the month to pay yourself, you’ll find there’s no money left over for you. All too often, which I’ve personally found to be true, you end up with more month than money. You pay yourself first by enrolling in your company’s 401(k) or by opening an IRA and setting up automatic contributions on the first of the month.
- The silver medal is “Stay out of debt.”
Debt is crushing us. Specifically, credit card debt. The average American has over $6,000, and it keeps us trapped in a vicious cycle. If you’re in debt, do whatever you need to do to get out. If you’re not, stay out. You can access our Get Out of Debt course at no-cost.
- The bronze medal is “Diversify.”
With the rise of investing apps like Robinhood, many more people are investing. While this is a good thing, the flip side of the coin is that many are also losing money. Too often, we invest too much of our money in concentrated investments like individual stocks or cryptocurrency. While doing so provides a big upside, it also puts us at risk for a big downside. The vast majority of your portfolio should be in a well-diversified, low-cost investment like a mutual fund or ETF.
Blue, Red and White
For our next three, we’ll use ribbons.
- The blue ribbon of personal finance is “Accept personal responsibility.”
With great responsibility comes great power. Our society has been tricked into thinking it’s wise to argue and advocate for our limitations. We place blame on outside forces instead of taking ownership of our lives. To achieve financial success, you need to become the CEO of your financial life. You need to own it; all of it.
- The red ribbon is “How you look at something makes all the difference.”
Perspective is everything. If you view your profession as a job that sucks, you’ll have a sucky job. If you instead choose to find the positive impact the work you’re doing has, you’ll be engaging in meaningful work. We all have choice. We can choose to view life through a positive lens, or we can choose negativity. Choose wisely.
- The white ribbon is “Spend less than you make.”
I’m reticent to tell people to “Live within your means,” because I feel that’s limiting. Where you’re at today will probably not be where you’re going to be in three years from now (If it is, that’s an entirely separate conversation). Spending every penny you earn (and more) is a recipe for failure. You will never become financially successful if you do that.
Diamond, Emerald and Ruby
For our final three, we’ll use precious stones.
- The diamond of personal finance is “Security first, then prosperity.”
I want you to be rich, if that’s what you want. I want everyone to get exactly what they want in life and with their money. But I know you’ll never get “there” unless you first achieve financial security. You reach financial security once you get six month’s worth of expenses saved in your emergency fund. I know it won’t be easy, but it’ll be worth it. You’ll have financial security and you’ll be ready to pursue financial prosperity.
- The emerald is “Work hard.”
There is dignity in labor, and hard work is required to have the life you want. In fact, I don’t think anything worthwhile was ever achieved without it. There is no path to a life worth living that is traveled without effort. Recognize and embrace the grind.
- The ruby is “Stand for what you believe.” Stand for something, or you’ll fall for anything. It’s essential you become a wise steward of your most precious and valuable resources. We have a finite amount of money, time, energy and attention. Who and what you give them to will equate to the quality of your life. Be mindful of how you’re spending them; if you’re not, you won’t be the results you’re looking for.
I know what you’re thinking, “Aren’t a lot of these applicable to every aspect of my life?” Yes, they most certainly are. These are first principles, which means they’re true. They’re true for personal finance, and they’re true for everything else.
Take the gold medal, “Pay yourself first,” and think about it in terms of how you spend your time. If spending time with your kids is a priority for you, you need to put time to do it into your calendar. If you put everything else into your calendar first, you’ll find there’s no time left over for your family. The same is true for fitness and most everything else.
If you’re someone who can keep 9 ideas in your mind, do it. If you need to focus on a few at a time, start with Gold, silver and bronze. If you can master those three, you’ll be on your way to financial wellness.
If you’re ready to take control of your financial life, check out our DIY Financial Plan course.
If you’d like help getting on the same page with your partner, check out our Same $ Page Course.
If you’d like to help your kids get good with money, check out our Teaching Kids about Money course.
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