By Frank Conway
For most people today, how they manage their personal finances and have a reasonable amount of money to live on throughout their lives will depend on their personal relationship with money.
If that relationship is good, if they plan well, in most cases they should do well.
But, if they fail to take the necessary steps to accumulate savings and build (and protect) wealth, it is likely that they will encounter major financial difficulties.
There are four main pillars to building personal financial security, those are:
- Establish and maintain a rainy day fund for life’s little emergencies. The purpose of which is to minimise the need to borrow money, especially from high cost options that can cost a lot more in interest / charges in the near-term and long-term.
- Buy a home. Yes, this is a really important step to building personal wealth but the trick is to not ‘over purchase’. It is essential that when buying a home, the buyer(s) also ensure they leave sufficient wiggle-room to allow for budget flexibility.
- Protection – Life and illness protection is essential cover for any family, especially where there are dependants.
- Invest for retirement – it may seem to be a long way off but it’s not! The sooner start putting money away for your future needs, the sooner the compounding impact of growth can start. Oh, and look at investing passively and minimising fees at this will increase your compound growth opportunities (ask about the Total Expense Ratio – TER or Ongoing Charges Figure – OCF).
For those eager to lay the foundations of a secure financial future, the time to start is now. So, here are some steps to get you on your way:
- Set your personal goals and make a plan
- Live within your means
- Increase your financial knowledge
- Start early
- Save & invest on auto-pilot
- Learn and adjust
- Avoid minimalism
- Stick to the plan
Stay committed and good luck!