As a financial and legacy coach I am often asked one common question, “How can I achieve financial success?” I have found to achieve success in your financial life it takes vision, discipline, and faith. The12 steps below will help you achieve the financial stability and outcomes you desire.
1. Ownership – You must come to the understanding God has created everything in this world and you must look to him as the source for all your needs. Learning to submit to his authority in the area of money allows you to live a life of peace within your heart and mind as He lovingly will provide everything you need.
2. Stewardship – You must accept your role as a manager or steward since it is your responsibility to submit to the Owner as you will be held accountable for your efforts. With time you will learn God wants you to become a conduit so he can utilize all of His resources through your faithfulness.
3. Tithe /Save/Spend– The simple principle of tithing 10% first, saving 10% second, and living within the remaining eighty percent is the starting point. As you begin to own and implement this concept I encourage you to increase your tithe and savings as your faith, knowledge and self-discipline increase.
4. Earning Capacity – Everyone has the ability to earn money so let’s imagine you are a money-machine that you deposit money into on a weekly basis. During the remainder of your life you will earn money for the services you provide. The average adult will earn over one million dollars in their lifetime so you must understand the management of your money is as important as your earning capacity.
5. Interest – You must learn the principle of simple and compound interest. Invest the money you save so it can begin producing a harvest for you. The more your money makes the less you have to deposit into your money-machine.
6. Debt – Minimize or eliminate your debt as you are depositing into someone else’s money-machine. Remember, when you have debt you are controlled by the bank or mortgage company and it is their rules that are applied in uncontrollable situations.
7. Financial Plan -It is imperative you have a written plan with goals, objectives, and a budget. The average investor does not and will not attain what they have not defined. Review the plan at a minimum on an annual basis so you may make adjustments as your goals and situation dictate.
8. Understanding Risk – Every investment has risks and fall into one of three categories which you determine; minimum, moderate, or aggressive. Utilizing an investor profile will allow you to establish a baseline risk tolerance for your personality in which to compare your investment options.
9. Cost – Every investment choice comes with fees and cost in order to manage the investment. Management, trading, acquisition, brokerage and governmental fees are the major that must be deciphered. It is your responsibility to completely understand and have disclosed to you all fees as they will erode the return on the investment.
10. Tax impact – Income tax will affect your return as we must pay to ‘Caesar’ what he is due. Qualified investments like 401k, IRA, and pension defer the principal and interest till they are removed from the account. They will be taxed as ordinary income and the tax will be calculated based upon your income tax bracket for that year. A non- qualified investment means the principal had income tax paid on the principal from a previous year. When the investment creates interest, dividend, or a capital gain it will have tax due in that year. It is important to have a tax professional help you navigate the tax impact as the rules are always changing.
11. Diversification – Another way to avoid risk is have your investments diversified. Remember, Grandpa always said, ‘Don’t put all your eggs in one basket,’ and that is what diversity means. If you have money in the stock market I would suggest utilizing an index strategy that buys one of every type of investment in its market place and provides you the diversity with low cost and higher tax efficiency.
12. Engaging Professionals – For some individuals managing their investments is overwhelming and not their strength. It is totally acceptable to look for a professional who can help but make sure you are aligned with them in investment style, temperament, and faith. As a steward you can delegate responsibility but not accountability. Don’t be shy about reviewing and asking questions so you are at peace with your investment decisions.
God knew the struggles we would have with our finances so he gave us several great scriptures to encourage us. I find great comfort in Proverbs 8:17-18, “I love those who love me, and those who seek me find me. With me are riches and honor, enduring wealth and prosperity.”
As you seek God daily through his word, May he bless you in and through your financial journey. Keep walking forward with vision, discipline and faith for they will lead you to financial freedom and success.
Guy Hatcher – known as The Legacy Guy – has spent his lifetime helping families plan their legacy. His new book, Your Future Reflection: How to Leave a Legacy Beyond Money, is now available at amazon.com. Follow him on twitter @guyhatcher or contact him at: www.guyhatcher.com.