Family, friends, fun and festivities. The Fourth of July is one of my favorite celebrations each year. I wrote this column on the occasion several years ago, but the issues and challenges remain the same today.
Well, it’s July, the month we celebrate our independence as a nation. The casual historian might mark July 4, 1776, as the beginning of the American Revolution. In reality, the war kicked off more than a year earlier with the Battles of Lexington and Concord. But the Declaration of Independence marked the point of no return — our Founding Fathers were committed to liberty or death.
Where am I going with all this? Well, just as it took a formal written declaration to galvanize and commit our forefathers to national independence, the same sort of effort is required to put ourselves on the path to financial freedom. So take some time this month to create, update or modify your own road map to financial sovereignty.
You can start by considering the following tenets as you develop your own guiding financial document.
I shall live within my means. This sounds so basic, but it’s a powerful commitment with broad-ranging benefits. It’s not a stretch to say our Founding Fathers would be shocked at our present state of financial affairs — as individuals and as a nation. As I’ve said here before, spend less than you earn and save some to boot. There’s a simple tool that will enable you to live up to your declaration: a budget. Set aside time to list your income versus expenses and savings. Look for places to cut back if the numbers don’t work. The goal is to make this a document that guides you through your daily financial life.
If living within your means becomes one of your guiding principles, you’ll avoid crippling debt, have money in the bank and lay the foundation for a financially sound future. As Ben Franklin said, “Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones.” That’s true of your financial net worth, too.
I shall prepare for the unexpected. Stuff happens. Your plans should reflect the unknown. Last fall, when the government was on the verge of a shutdown, many folks were concerned about being able to pay the bills if they missed a paycheck or even half a paycheck. The congressional battle over the budget was truly disconcerting. But the idea that so many people would be financially crippled if they missed a paycheck bothered me more.
Start building your emergency fund now. Setting aside $25 or $50 per paycheck into a savings account is a good start. And commit to a periodic review of your life, home, auto and other insurance policies to ensure they offer the appropriate amount of protection at the right price.
I shall responsibly use debt. If you don’t use it at all I won’t be offended, but with cars and houses, it’s probably difficult to be a cash buyer. Just remember, credit cards should be used for convenience or rewards points, not as a tool to spend more than you have. Use credit in the context of “living within your means.” Make timely payments and check your credit report periodically. Payday, title or tax refund anticipation loans shouldn’t be a part of your financial toolkit.
I shall save for the future. Don’t put it off any longer. Start using the Thrift Savings Plan, set up an IRA or put away funds for the kids’ education. There are hundreds, if not thousands, of resources to help you learn more about saving and investing, but only you can decide to get started.
So, as we give thanks for the good fortune of being born in the world’s greatest nation and celebrate the courage and sacrifice of those who founded it, commit to these four financial declarations. I’m certain they’ll aid in your quest for “life, liberty and the pursuit of happiness.”
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