It’s important that before you actually start investing on your own, that you get your financial house in order. Many people don’t track their spending and many of us haven’t started saving for retirement. There’s always room for improvement when it comes to what we’re doing with our money, which is why I want to give you a financial challenge…
How Much Do You (Really) Need to Retire?
You might be pretty shocked when you hear the number…
Let’s say that you want to retire in 20 years and you want to live a $50,000 per year lifestyle.
If you don’t know how to invest, and you put your money into a normal combination of stocks and bonds at your retirement, you are going to need almost $3 million 20 years from now in order to live a $50,000 per year lifestyle. That’s a comfortable but minimal lifestyle in a 30-year retirement.
There are some things you can do to get your finances in order and on track.
By the way, if you learn to do Rule One Investing, you’re going to need a lot less money, because you can count on much higher rates of return in your retirement.
2022 Financial Health Challenge
Here are some things you can do to get your finances in order.
1) Analyze Your Income and Your Expenses
Ask yourself, “What income can I count on? What am I spending money on that is absolutely necessary? What am I spending money on that isn’t essential?”
It’s time to get organized. Lay out all of your income and your bills, and really look at what you have.
2) Ensure You’re Not Spending More Than You’re Making
I worked in the Grand Canyon for a long time where I was making $4,000 a year. When I started investing, I didn’t have a lot of savings. I started investing with $1,000.
At that time, what I had going for me was that I could live out of a duffel bag. I could live on $4,000 a year, so it was pretty easy for me to just keep the belt tight and save money. Just make sure you don’t spend more than you make. If you are, figure out where you can cut some of your spending.
3) Add Up Your Debt, and Then Decide How to Pay it Off
We want to make sure that we’re not incurring debt that we don’t have to incur.
Bad debt is debt on things we consume because we think we need to. Things like a better car or a bigger TV. All those needs turn out not to be a need. They turn out to be a want. Those wants will get you in financial trouble. Bad debt incurs credit risk that you don’t need to incur.
The kind of debt that’s good is the kind that produces more cash flow for you in the future. Debt to buy a home that produces cash flow from rentals is good debt. Debt to get an education or to learn how to invest is good debt.
4) Review Your Investment Accounts
Your investment accounts are 401(k)s, IRAs, and trading accounts. Make sure that you’re contributing what you can into them, and check on your returns.
All of us should be able to put away at least $5,000 a year. One of the retirement mistakes people make when they’re trying to save money is that they start feeling like they’ve got to take care of their kids and others when they can’t even take care of themselves. Make sure that you take care of yourself first in the present and in the future.
5) Make a Promise to Yourself
Next, make a promise to yourself. Where do you want to be financially by the end of the year? How about in five years from now?
Promise yourself something like:
“By the end of the year I have my debt under control,” or “I’m living on less than I earn,” or “I’ve saved $5,000 dollars this year.”
All of this can be tough to do on your own, and it is.
Join My 14-Day Financial Fitness Challenge
It’s fun to learn about it. It’s fun to watch videos. But, doing it is a whole other story. So, here’s what I’m going to do. I’m giving you a 14 day financially fit challenge for 2022. It’s like going on a diet, the first 14 days are the hardest. This is designed for you to get your finances in order. It consists of one simple thing to do each day.
At the end of 14 days, you’re going to be in a much better place financially, because you’ll have a plan and start working on. You might even have some money to invest, which would be good as well. Click the button below to download the challenge and get 2022 started off right.
Editor’s Note: This post was updated for 2022 with additional financial tips.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.