Every family dreams of being financially secure. It means gaining the freedom to live without worrying about job cuts, redundancies or salary reductions. As bleak as it seems now, it is possible to build financial security.
According to Australian financial expert and author of The Seven Ages of Money (Choice Books), Tim Blue, financial security is built on time, discipline, knowledge and strategy. Here is some useful information he reveals in the book.
Give Time to Build Wealth
Time will help families build wealth through compounding – the effect of reinvesting earnings from investments. Although the return may not be very significant in the beginning, over time it will grow faster and faster.
“This principle works only if you allow enough time,” writes Blue, adding that the longer it works, the more it will benefit investors.
Be Disciplined in Money Matters
Discipline is crucial in money management. Start with saving early and regularly. Pick up some household budgeting tips to make sure there is money to spend and to save. When there is a decent amount to put into investments, resist greed and impatience, warns Blue.
He says that people invest in shares, bonds and managed funds because the value of the investment goes up over time, usually faster than inflation. However, many make the mistake of expecting a big return too soon, especially when they see friends and families making a lot more money in short periods of time.
Greed and impatience often step in here, causing many investors to abandon their well-thought financial strategies. Avoid doing that. Those who really want to be become financially secure need to remain disciplined and follow strategies that were already planned for their families, not listening to somebody else’s hot tips to get rich quickly.
Have Knowledge on Tax, Insurance and Investments
Tax-related matters often seem confusing to many people. But ample knowledge on tax will save the family a lot of trouble. Know the tax breaks and make use of them. Find out what the best tax deduction is for the family. See how income splitting can allow couples to enjoy lower income tax rates.
There should also be adequate insurance for the family. Adequate life insurance, income protection insurance and private health insurance are crucial, especially for families with young children and other dependents.
Before investing, do thorough research on prospective investments, if possible through a registered financial planner. Expect six to12 months before making the first investments. Also, learn to recognize financial cycles – a continuous process that can change suddenly, for better or for worse.
Device Firm yet Flexible Financial Strategies
Building financial security and wealth also requires firm strategies that can be revised when there is real need for it, Blue points out.
He says, “Educating yourself about money should be the core of your strategy. You might start with the finance pages of the daily newspaper.” Financial magazines, financial programs on TV and analyst reports are good sources of reference too.
Financial security is something attainable for every family. To make it happen, allow time to build wealth and be disciplined about saving money and sticking to a well-planned financial strategy. Families should also educate themselves about tax, insurance and investments as well as read up as much as they can about money and finance.