Successful Habits of Wealthy People

Jane Young, CFP, EA

Jane Young, CFP, EA

Many believe that wealthy people are lucky or are born into their wealth but this myth is largely dispelled by research conducted by Thomas Corley.  Thomas Corley, CPA, CFP is president of Cerefice and Co. and the author of Rich Habits: The Daily Success Habits of Wealthy Individuals.  Over a five year period, Thomas Corley interviewed 233 millionaires and 128 people living in poverty.   Through these interviews he uncovered many daily activities that differentiated the two groups.  His research indicates that we have control over our destiny with our daily actions and habits.  It’s not always easy, but we can create our own luck by engaging in activities that will lead to greater financial success.  Over 85% of American Millionaires are self-made and are the first generation of wealth in their families.

Thomas Corley found that good habits are the foundation of success.  He discovered successful people have many good habits interspersed with a few bad habits where unsuccessful people have many bad habits with a few good habits.  Below are some of his findings on habits or daily activities practiced by successful people.

Successful people are goal oriented, 95% write down their goals and 81% maintain a To-Do list.  They don’t procrastinate and are focused on accomplishing things.   They are proactive, take control of their lives, and get things done.  They don’t let events or other people control their priorities.  Unsuccessful people are not goal oriented and can become easily distracted.  They don’t have goals to keep them grounded and focused on the end result.

Successful people eat healthy and exercise, 76% of the wealthy exercise aerobically 4 days per week. They rarely overindulge or binge, if they slip it’s a planned overindulgence on special occasions.  Eating well and exercise improves the immune system and energy levels which results in greater productivity.  Unsuccessful people have no consistent day to day control over their health.

Successful people place great value on relationships.  They are focused on others rather than themselves.  They understand the importance of networking and look for reasons to reach out to their contacts.  They don’t waste time in negative relationships with people who are only concerned about themselves.

Successful people engage in moderation.  They keep their thoughts and emotions in check and avoid obsession, addiction, extravagance, jealousy, envy and fanatical behavior.  People enjoy their company and feel comfortable being around them.  Unsuccessful people are more likely to live in conflict with little control over their lives.

Successful people are constantly engaged in self-improvement.  They watch very little TV and read for self-improvement.  They keep up with changes in their profession and devote time every day to better themselves.

Finally, successful people have a positive attitude.  They are happy, enthusiastic, confident and well balanced.  They feel empowered and take control of their lives rather than allowing outside forces to determine their destiny.  Have you taken control of your destiny?

Embracing the Future on Your Own

 

Jane Young, CFP, EA

Jane Young, CFP, EA

Losing a spouse completely changes your life, and it’s important to take the time you need to grieve and heal.  The sadness may never go away and you’ll always miss your husband, but after two or three years you may be ready to look toward the future.  Before the loss of your husband, the two of you made plans; these plans may no longer be the best course of action for you.  It is common to feel an obligation to follow the plans you developed together, that you would somehow betray your husband’s memory to follow a different course.   Nothing could be further from the truth.  Your situation has completely changed and you may have a whole new perspective on things.   Plans that worked for the two of you, together, may no longer be practical for you.  Without even realizing it, you may have been striving to fulfill your husband’s dream rather than your own.   It’s time to follow your own path and build a future that supports your new hopes and dreams.  This article makes reference to widows but it can also be helpful to widowers.

Start by reflecting on your personal values; think about what and who is important to you and what you enjoy doing.  What type of lifestyle do you want to lead and where do you want to live.   Take out a piece more info

of paper and fill it with goals and ideas on things you would like to accomplish.  Let your mind wander, don’t evaluate, just brainstorm ideas.  Now go back and contemplate this list and formulate about five to ten realistic goals to be achieved in the next year or so.  Prioritize these goals and identify some action steps to be taken.

Now it’s time to review your financial situation with respect to your goals.  Many of your goals may be financially oriented.  Start reviewing your current cash flow, identify and tabulate your expenses, and compare them to your income.  Are your expenses in line with your goals, or do you need to change the way you spend money.   At the very least, make sure your expenses don’t exceed your income and put aside an emergency fund equal to at least three months of expenses.  I also encourage you to save at least 10% of your annual gross income.

Once your current financial situation is secure, develop a financial plan for the future.  Are there any major changes needed to achieve your long term goals?  Do you want to live in a different city or do you want to sell your home and buy something with less maintenance?  Do you need to rearrange your spending habits or make some changes in your career?  As you plan for the future, make sure you are saving and investing enough to cover retirement expenses.  Be sure to incorporate some fun and adventure into your plans!

Tips to Acheive Financial Fitness

Jane Young, CFP, EA

Jane Young, CFP, EA


The first step toward financial fitness is to understand your current situation and live within your means. Review your actual expenses on an annual basis and categorize your expenses as necessary or discretionary. Compare your expenses to your income and develop a budget to ensure you are living within your means and saving for the future. The next step is to pay off high interest credit cards and personal debts. Once you have paid off your credit cards, create and maintain an emergency fund equal to about four months of expenses, including expenses for the current month. Your emergency funds should be readily accessible in a checking, savings or money market account.
Now it’s time to look toward the future. Get in the habit of always saving at least 10% to 15% of your gross income. Think about your goals and what you want to accomplish. If you don’t own a home, you may want to save for a down payment. When you purchase a home make sure you can easily make the payments while contributing toward retirement. Generally, your mortgage expense should be at or below 25% of your take home pay.
Contribute money into retirement plans, for which you qualify. Make contributions to your 401k plan, at least up to the employer match and maximize your Roth IRA. If you are self-employed, consider a SEP or a Simple plan. If you have children and want to contribute to their college expenses, consider a 529 college savings plan. Do not contribute so much toward your children’s college fund that you sacrifice your own retirement.
As you save for retirement, be an investor not a trader. Investing in the stock market is a long term endeavor, forecasting the short-term movement of the stock market is fruitless. Avoid emotional reactions to headlines and short term events. Don’t overreact to sensationalistic stories or chase the latest investment trends. Establish a defensive position by maintaining a well-diversified portfolio, custom designed for your unique situation. Slow and steady wins the race!
Don’t invest in anything that you don’t understand or that sounds too good to be true. If you really want to invest in complicated products, read the fine print. Be especially aware of high commissions, fees, and surrender charges. There is no free lunch; if you are being offered above market returns, there is probably a catch. Keep in mind that contracts are written to protect the insurance or investment company, not the investor.
It is impossible to predict fluctuations in the market or to select the next great stock. However, you can hedge your bets with a well-diversified portfolio. Establish an asset allocation that is aligned with your goals, investment timeframe, and risk tolerance. Your portfolio should contain a mix of fixed income and stock based investments across a wide variety of companies and industries. Rebalance your portfolio on an annual basis to stay diversified.

10 Financial Planning Tips to Start 2012

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Jane M. Young, CFP, EA

 

1. Dream – Take a few minutes to look at the big picture and think about what you want from life. How do you want to live, what do you want to do and how do you want to spend your time. Successful businesses have vision statements and strategic plans. Create your own personal vision statement and strategic plan.

2. Set Goals – What are your goals for the coming year? Start by brainstorming – fill a page by listing all the goals that come to mind. Think about different facets of your life such as family, career, education, finance, health and so forth. Review your list and prioritize three or four goals to focus on in the coming year.

3. Evaluate Your Current Situation – What did you spend and what did you earn last year? What was necessary and what was discretionary? Did you spend in a purposeful manner and do your expenses support your goals and strategic plan. How much did you save or invest in a retirement plan? Can you increase this in 2012? If you are like most of us, a category is needed for “I have no clue”.

4. Track Spending and Address Problem Areas – If you aren’t sure where you spent all that discretionary cash, track your expenses for a month or two. It can be very enlightening – Yikes! Identify a few problem areas where you can cut spending and really place some focus. Identify the actions you will take to cut spending in these areas. Set weekly limits and come up with creative alternatives to save you money.

5. Evaluate Your Career – Are you doing what you really want? Are you being paid what you are worth? Have you become too comfortable that you are settling for safe and familiar? Could you earn more or work in a more rewarding position if you took the time to look? Are you current in your field or do you need to take some refresher courses? Do you know what it will take to get a promotion or a better job? In this volatile job market you need to keep your skills current, to nurture your network and to maintain a current resume.

6. Maintain an Emergency Fund – Start or maintain an emergency fund equal to at least four months of expenses, including the current month. This should be completely liquid in a checking, savings or money market account.

7. Pay Off Debt – Establish a plan to pay off all of your credit card debt. Once this is paid off establish a plan to start paying off personal debt and student loans.

8. Save 10-15% of your income (take advantage of employee Benefits) – You need to save at least 10-15% of your income to provide a buffer against tough financial times and to invest for retirement. At a very minimum, you need to contribute up to the amount your employer will match. Additionally, be sure to take advantage of flex benefits or employee stock purchase plans that may be offered by your employer.

9. Maintain a Well Diversified Portfolio – Maintain a well-diversified portfolio that provides you with the best return for your risk tolerance, your investment goals and your investment time horizon. Be sure to re-balance your portfolio on an annual basis. Avoid over reacting to short term swings in the market with money that is invested for the long term.

10. Don’t Pay Too Much Income Tax – Avoid paying too much income tax. Get organized and keep good records to be sure you are maximizing your deductions. Make tax wise investment decisions, harvest tax losses and maximize the use of tax deferred investment vehicles. Donate unwanted items to charity – be sure to document your donations with a receipt.

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