By Horst Siegler
Special to the Financial Independence Hub
The Twelve Tables formed the basis for Roman law. The twelve suggestions below form the foundation of a sound financial plan. It should be devised and agreed upon by you and your partner and should result in a secure financial future.
1.) Believe you can succeed
No enterprise, be it financial success or otherwise, can succeed without a belief that it is possible. Much else goes into accomplishing your goals but without a belief you can succeed, they are doomed to failure.
2.) Agree on the definitions of the terms in your financial plan
You and your partner must have the same idea of what wealth, risk, budget and a lot of other terms mean or you will be working at cross purposes.
3.) Assemble a financial team
Most Canadians have more people looking after their teeth than their money. At a minimum, the financial team should consist of a financial planner/advisor, accountant and notary or lawyer. The team must agree with the definitions you and your partner have.
4.) Commit to working hard, being disciplined, persistent and determined and seeing the plan through no matter what
Little about financial success is difficult but it is hard work: not the same thing at all.
5.) Develop long-, medium- and short-term goals
Write them down; post them where you will see them regularly. Record them in a binder and track them.
6.) Commit to learning about finances every day
Ask! In the real world, asking is not silly and can save you thousands. Search the Internet, attend courses and lectures and workshops. Not everything you hear or see is valuable in your financial plan but even knowing what you don’t want to do is valuable.
7.) Know where your money is going, EVERY cent
Then set up a budget based on how you spend your money. Having a budget doesn’t make you financially responsible, sticking to one does.
8.) Live 10% below your means, more if you can manage it
The budget you set up should be based on at most 90% of your income, which will allow you to pay yourself first with the 10% you hold back. It forms the basis for your savings and investment strategy you will devise with your financial team.
9.) NEVER get into debt (with one exception)
Okay, you’ll probably need a mortgage for your house. Other than that, never incur consumer debt. It will cost you thousands. If you don’t have the money to buy it, wait until you do or do something to earn extra money so you can buy it.
10.) Part of never get into debt is pay off your house as quickly as possible so you can live “rent free”
Your house will still cost you plenty but at least you’re working towards increasing its value instead of making the banks richer.
11.) Invest in “things” with the 10% you hold back
Consult your financial team so you feel safe about how your money is being put to use. You work hard for your money; it should work hard for you.
12.) Safeguard your future
Buy appropriate insurance; mortgage, disability, fire and the term insurance offered by many employers. Make a will and update it regularly as your life changes. Teach your children to be responsible about money. Plan ahead for retirement early so the contributions you make can be smaller than if you begin later in life.
The above twelve suggestions are the bare bones of a sound financial plan. They are discussed in greater detail, using examples, in my book Bet on Yourself to Build Wealth. Once implemented, the sacrifices you make will no longer look like sacrifices but investments in your future.
Horst Siegler is a retired teacher, carpenter, commercial photographer and coach. His financial advice, which he has put to good use for his family, can be found in greater detail in two books titled “Bet on Yourself to Build Wealth.” The general reader version can be found and previewed here and the student / young adult version here.