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Financial planning for financial independence

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3 Simple Steps to Financial Security

Being in the financial planning arena for a number of years now, I've seen quite a bit.  One thing that has really stuck with me through this journey is how people nearly always latch on to the simple and push aside the complex.  There have been times I've dedicated countless hours to creating a complex financial plan for someone (expecting them to be blown away with the level of detail), only to actually witness their shoulders slump upon review.  Dial up 911, because I quite literally murdered any motivation they had to act on and improve their financial standing.

The fact of the matter is that simplicity wins when it comes to nearly all areas in life, especially personal finances.

For that very reason, I want to hit the reset button today and focus on the basics.  Time and time again, I notice the root of most financial issues stemming from a lack of fundamental financial discipline.  Don't overthink things.  Instead, focus on these 3 basics that will get you on the path to financial security no matter what else might be happening in your world.


1. Master Your Spending

In other words:  Budget regularly
Why:  I've said this before and I'll say it again today, the most common financial mistake for most is a negligence to budgeting.  Inflows HAVE to be greater than outflows for any financial success to occur.
Tip:  Budgeting can be tedious, which is why free solutions now exist that help automate this process for you.  No more excuses.

2. Enhance Your Savings

In other words:  Sock away at least 20%
Why:  There is NO investment plan than can make up for a lack of savings.  While saving 10% of your total income (before tax) is OK, a 20%+ savings rate is the space where true financial security hangs out.
Tip:  Automate, automate, automate.  Set up automatic withdrawals each week/month to your savings and investment accounts.  The less you have to think the better.

3. Put Your Money to Work

In other words:  Invest
Why:  Each dollar you save is chomping at the bit to earn additional money for you.  Let it!  After setting aside 6 months of your household spending needs in an emergency fund, invest the remainder of that savings.
Tip:  If the world of investing seems daunting (which it can be), turn to an automated solution such as Betterment to take that stress off of your shoulders.


That's it.  While there are certainly other areas of financial planning worthy of your attention (insurance, estate, taxes, etc.), it is pointless to stress over these items without first addressing your spending and savings habits, which are the absolute foundation for financial success and security.


Want an easier way to remember these three steps?  Just think BSI: Budget, Save, Invest.