Focus On Simple And Achievable

Like anything worth having in life, achieving financial strength requires discipline and focus. However, many people are not taught about “practical” ways to improve your financial situation in school. You may have taken an economics course and learned about fancy concepts like Pareto optimality, but unless you are an economist or MBA, it is unlikely that you use those concepts in everyday life.

We want to help make it easier for you to become stronger financially, so we have put together a number of organized steps that will make it easier to actually USE and APPLY financial concepts to improve your financial strength.

Make Better Decisions With Your Money

If you are like most people, than you have a limited amount of money, but lots of bills and dreams. One obvious step to take is to make better decisions with the money that you do have.

Generally, your household expenses shouldn’t exceed 33% of your income. Debt payments should not exceed 30%.

Buy only what you need. Ask yourself, “Do I really need it?” before buying.

Credit cards make it easy to spend money you don’t have. Don’t use them unless you can pay off the balance every month.

Pay your bills on time. Remember that fees and interest can add up quickly.

If possible, consolidate debts for lower interest payments. Save the difference or pay down other debts.

Set Short-Term, Mid-Term, and set aside enough money to get through 3-6 months of unemployment or major emergencies.

An emergency fund will help you get through tough times without getting into credit card debt.

What Do You Want To Achieve…

6 Months From Now?

1 Year From Now?

10 Years From Now?

What Are You Willing To Do To Reach Those Goals?

One of the fundamental money concepts is Interest.

Interest, to give a very basic example, is often a “price” that is paid to borrow money. Compound interest is when interest is added to the starting amount, or principal, so that the interest that has been added also earns interest.

With compound interest, you earn interest on the money you save and on the interest that money earns. Over time, even a small amount saved can add up to big money. Whether you realize it or not, the concept of interest is a big part of your financial life because the possibility of earning interest is why people lend and borrow money.

What Does This Mean?

Your money can work for you when “your money earns money”. When your money goes to work, it may earn a steady paycheck. Someone pays you to use your money for a period of time. When you get your money back, you get it back plus “interest.” Your money can make an “income,” just like you. You can make more money when you and your money work.

What Is Inflation?

The simplest way to think of Inflation is as an increase in the price you pay for goods and services. In other words, a decline in your purchasing power.

Every year, the United States Department of Labor takes prices of a variety of products and services. This information is used by many economists to calculate an average inflation rate. The average annual inflation rate since 1913 has been 3.2% per year.*

This means, 10/20/30 years from now, ordinary goods will likely cost more and you will be able to buy less with the same amount of money as today.

What Does This Mean For Me?

Based on historical averages, your buying power is going to decrease an average of over 3% every year. That means when you plan for the future, you have to take into account that your money in the future will probably buy less than it does now. In other words, in the future, you might need more money to buy the same things as you can today with less money.

What Can I Do?

One thing to consider when investing or accumulating assets is to think about whether the interest you are earning is going to be higher than the rate of inflation over the same amount of time. If your rate of return is lower than inflation, you may not really be “growing” your money.

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