By Dwight Nichols …
A wise man saves for the future, but a foolish man spends whatever he gets. Proverbs 21:20-(TLB) …
Steady plodding [saving consistently] brings prosperity; Hasty speculations bring poverty. Proverbs 21:5 (TLB) …
What would your life look like if you were completely out of debt and had enough cash reserve to live 6 to 12 months without a paycheck … you have more than enough to give to your local church or your favorite charity or to help a family member in need?
Moreover, what if you had multiple income streams from your business and/or Investment accounts that continue to produce more income each year regardless of the ups and downs in the economy? Well, that is exactly what you can expect if you follow God’s principles/rules regarding financial and economic matters.
Yet, according to recent surveys, 7 out of 10 people are struggling financially, not having anything left over for emergencies or unexpected events after paying their monthly bills. The majority of American households were already head over heels in debt and living from paycheck to paycheck, even before the economic challenges caused by the Covid pandemic.
What are they doing wrong and what can they do to get on the right track financially? What practical steps can they take to take control of their finances, build wealth, and protect their families from the difficulties in the economy?
10 Keys to Personal and Business Success in Any Economy
What is net worth and what role does it play in your long-term wealthy life program? According to the Oxford Language Dictionary, net worth is the wealth of an individual, company, or household taking into account all financial assets in liabilities… Simply stated, Net worth is the amount of wealth that you accumulate over time after paying living and operating expenses… your accumulated assets minus your liabilities.
What practical steps can you take to increase your disposable income and build wealth in any economy?
Listed below are the 10 steps necessary to get your financial house in order no matter how much money you earn, your current financial circumstances or the conditions of the economy.
These 10 steps will help position you and your family to increase income, build wealth and prosper through any financial storm. Here is the 10- Step Financial Freedom Plan for Financial Success … Enjoy!
Step # 1
Plan Ahead …
Your success in life will be determined by the goals you set, by the choices you make and how well you manage the resources God has entrusted to your care.
Put your financial plan in writing: what is it you want to accomplish in life? What does Financial Success mean to you?
There are three primary components to a successful money management plan: a) Giving (planting seeds to make a difference in the lives of others), b) Savings (building surplus/wealth), and c) Spending, your monthly expenditures/living expenses (see The Destiny Institute Cash flow icon)
First, you should determine your existing financial position. Where are you now versus where you would like to be in the future: your short-term and long-term financial goals. List your current debt and your debt reduction goals, your current and future Savings Plan.
Second, set goals and prioritize your monthly expenditures. Third, write out your retirement goals. Determine how much money you would like to have to live comfortably at retirement.
These goals are important to your long-term success (see The Financial Freedom Quick Start kit). Keep your written financial plans in a safe place, review and refine them every 6 to 12 months at minimum.
Step # 2
Set up your short-term emergency fund (AKA your Surplus / Freedom account)
There are two things that you must have to be successful financially: Income and Cash Reserves.
The purpose of this step is to start funding your short-term cash reserves, your emergency fund savings account. Your goal is to build your short-term savings to have 3 to 6 months of living expenses to cover unexpected events and to make cash purchases instead oof using debt. To get started, your first step is to make a deposit (equivalent to one month income) into your emergency fund. This covers unexpected events, which will surely happen.
This account should be separate from your regular checking account. Your ultimate goal is to take a minimum of 10% off the top of your paycheck (your take home pay) each pay period and deposit it directly into your short-term savings account until you have the 3 to 6 months living expenses set aside.
Your Surplus savings account has two components: short-term savings and long-term savings. When your short-term emergency account is fully funded, the excess funds go directly into your long-term savings account. This will provide the foundation for your long-term wealth-building.
Your Surplus savings account is a critical component of your Financial Freedom Plan. The purpose of this account is not only to provide sufficient reserves to cover unexpected events, but to provide the resources necessary to accomplish all your financial goals.
In addition to having funds to cover emergencies, this step establishes a savings account that can be used to accelerate your wealth building program. Once you have fully funded your Surplus account, you will have positioned yourself to have enough cash reserves so that you can borrow from yourself instead of borrowing from the bank!
Step # 3
Establish a Spending Plan (your budget) To Cover Your Monthly Living Expenses
In order to take control of your finances, you must discipline yourself to control your spending. You must learn to set spending limits so that you never spend more than you have coming in.
The goal of this step is to start reprioritizing your spending. Now that you have set up your Surplus account, take a realistic look at your living expenses and budget your expenses to live on 70% of your income.
You can use your personal checking account for this purpose. Living within your means mean that you should never spend more than you have coming in. Always remember, if you spend less than you earn, you will always have a surplus.
Never spending more than you earn is a bedrock decision that must be made on your part … This is where you must draw your line in the sand. No matter what you earn, you must establish this as a minimum goal. Force all of your expenditures into the 70% rule.
Note, earning more is not your main priority at this point! No matter how little or how much you earn, in order to take control of your finances, you must learn to effectively manage what you already have coming in. Then, you can focus on steps to increase the amount of money you have coming in (see step # 9, Look for ways to increase your income Through investing and business ownership.).
Step # 4
Learn how to properly manage debt …
Debt is by-and-large the biggest hole in the average family’s budget. The average household spends from 30 to 35% of their income on debt payments.
In the U.S., we have been programmed by the banking /credit card and advertising industry to think, it is impossible to live a successful life without multiplying debt. We have been conditioned to think – get a decent job, get good credit, and pay interest on debt for the rest of our lives, versus earn, save, and receive interest payments.
Learn to live a dead free lifestyle… a life with a minimum amount of personal debt. The most important money move you can make to jump start your finances is to get out of debt. Organize a debt reduction plan that eliminates all unnecessary debt…You can double or even triple your disposable income by simply eliminating principal and interest payments. Use the rapid debt elimination plan provided in the Financial Freedom Quick Start Guide to pay off all debt including your mortgage in a fraction of the time.
Step # 5
Totally fund Your Emergency Account
Deposit three (3) to six (6) months living expenses into your emergency fund. To build a solid financial base, it is necessary to establish a habit of saving on a consistent basis.
Be consistent with your savings. You should continue to set aside a portion of every dollar you receive to establish your long-term wealth building program.
This is the foundation of your long-term wealth building plan. If you cannot start with 10%, take a step of faith to start setting aside something from every paycheck. This is another bedrock decision you must make. Set aside a percentage of your income to totally fund your emergency account.
If you do not make a firm decision to establish your Surplus account, you will continually be at the mercy of your financial circumstances. Make a quality decision. Drive your stake in the ground. Make a decision to start setting aside something, even if it’s a smaller amount until you can see better times.
A Free Gift for You
Something to Help You Get Started…Get your FREE Personal Finance Quick start Success Guide
Grab your FREE copy of my “Personal Finance Quick Start Success Guide … How to Eliminate Financial Stress, Build Wealth, and Find Financial Freedom — A 15 Step Checklist to Master your money and Jump-Start your Financial Future. You will also receive a free subscription to my “Master Your Money” Life Skills Newsletter.
Click HERE!
Step # 6
Eliminate Waste …
Reprioritize your spending habits to eliminate all unnecessary waste from your personal expenses.
Now that you have funded your emergency fund it’s time to start closing the holes in your monthly expenditures account.
In this step you start to budget and reprioritize all your monthly living expenses with the goal of living on 70% of your take home pay. Consider your needs versus your wants. Go through all your auto pay accounts and eliminate the ones you no longer need. Reduce your eating out expenses by cooking healthy meals at home. Avoid tickets, late charges, and unnecessary bank fees (see How to Eliminate Waste)
Note: Never use rent to own programs for furniture and other consumer items. Never use a Payday loan to borrow money if you need cash …. Never use a pawn shop or other high interest sources for quick cash! Now that you have a surplus, borrow the money from your surplus account and pay yourself back principal and interest.
Step # 7
Become a Wise Investor
The key to your long-term success is to consistently add to your long-term surplus/wealth-building account.
How do you Prosper financially in spite of a declining or deteriorating economic environment, even if most people are struggling? … Your ultimate goal is to make each dollar in your surplus account a permanent employee working for you, generating income on your behalf. As a good steward, once you have built up your cash reserves you must know what to do with the surplus funds.
If you have no debt and sufficient funds in your reserve account, you do not have to be concerned about the short-term ups-and-downs in the economy like most other people. After you pay off your debt your disposable income will increase rapidly. Continue to deposit 10% to 15% of your income into your long-term wealth-building account, even after completely funding your emergency fund.
Once you have developed a surplus, your objective is to find a safe place to put your hard-earned savings – a place where you have “access and control” over your money while building your long-term wealth building program.
Your goal is to build enough funds in your long-term surplus account so that you have enough reserves funds where you can borrow from your surplus account instead of having to borrow from the bank!
Step # 8
Purchase assets that increase in value, not consumer items that decrease in value …
How do you use your Financial Freedom Surplus account to avoid debt and build wealth even in an uncertain economy?
You can use your cash reserve to pay off credit card and other high interest debt, accelerate mortgage reduction plan and to make down payments on larger items such as automobiles and your home/ real estate.
Purchase instead of rent. Use homeownership and real estate as a base for your wealth building program. Learn how to purchase your home wholesale. You can develop passive income by investing in real estate and other appreciating assets. (See becoming a wise investor).
Don’t borrow from the bank borrow from yourself instead! Now that you have built up your cash reserves in your emergency fund, you can use your Surplus account when you need to borrow money.
For example, if you earn $5000 per month, with 3 to 6 months cash reserves, you will have $15,000 – $30,000 in your cash reserve account. Instead of borrowing from the bank, now you can borrow from yourself and pay yourself back principal and interest. You have just become the lender and not the borrower!
Step # 9
Look for ways to increase your income…
Use your imagination and creativity to search for ways to develop passive income based on your gifts, talents, and abilities.
What can you do if you are not satisfied with your current income? There are two components to Successful money management that must be taken into consideration at this point. First, you must learn to manage what you already have coming in (Personal entrepreneurship). Second, if you are not satisfied with what you have… ask God for a creative idea to increase your income.
Use your imagination and creativity to identify ways to increase your income. Now that you have learned how to effectively manage what you already have, it’s time to take a look at ways to increase the amount of money that you have coming in.
Ultimately, your goal is to have multiple streams of income..Your most important wealth-building tool is your monthly cash flow and your Surplus account. Now that you have set up your surplus account and paid down your debt, you may want to start identifying other ways to generate additional income to accelerate your wealth building capacity and supercharge your debt reduction plan. To accelerate this process, you may want to get a second job until your surplus account is fully funded or until you have paid off your debt.
Start your own business: learn how to use your gifts, talents, and life experiences to become more valuable to others… You are the answer to someone else’s prayer. God has given every individual gift, talents, and abilities, not only to take care of themselves and their families, but to be a blessing to humanity. The world is waiting for you to share your gifts, talents, and experiences … and they are willing to pay you for sharing your experiences.
Step # 10
Continue to build wealth and give out of your abundance …
Now that you have repositioned your life where you have no debt, your mortgage is paid in full, your investments are producing passive income or you now own your own business providing more surplus income than you need, it is time to start giving like you never gave before…
At this point, you are no longer dependent on your job, the government or anyone else other than God! Your next step is to start looking for ways to make a difference in the lives of others. Start sharing these principles with as many people as possible. Especially those who are having financial problems, Your family, your friends, your coworkers, your community, and the world at large. Let them know that it is possible to break the cycle of debt and poverty and exit the paycheck-to-paycheck lifestyle.
Remember, God wants you to be blessed financially so that you can be a greater blessing to others. Your goal at this point is not just to build wealth for yourself to have more money to buy more stuff, but to be in a position to make a difference in the lives of others, to leave the world a little better place than you found it.
_____________________________________________________
A Free Gift for You
Something to Help You Get Started…Get your FREE Personal Finance Quick start Success Guide
Grab your FREE copy of my “Personal Finance Quick Start Success Guide … How to Eliminate Financial Stress, Build Wealth, and Find Financial Freedom — A 15 Step Checklist to Master your money and Jump-Start your Financial Future. You will also receive a free subscription to my “Master Your Money” Life Skills Newsletter.
Click HERE!
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Dwight Nichols
Author, Teacher, Financial Coach
Dwight is a former investment banker, author, teacher, and financial consultant. He is the Author of Freedom from Financial Bondage, God’s Plans for Your Finances, and Money Skills for Young Adults … He is also the founder of Urban Impact International Ministries (uimi.org) and the Destiny Institute School of Finance.
For more than 30 years Dwight has been teaching young adults (and their Parents) how to take control of their finances (See You Tube) through financial literacy education and business ownership.
In all his books, videos, and workshops, he shares on the importance of learning basic money management skills to overcome financial struggles in your personal and business life (See Personal Entrepreneurship: Preparing for Increase)
The Destiny institute Basic Money Management Course provides a structured program and ongoing assistance to implement the principles outlined in the Destiny Institute program. The Financial Mentoring Program is designed to help people who are serious about getting their financial house in order and achieving their financial independence goals.
For questions and FREE ongoing support, go to dwightNichols.com and subscribe to the Master Your Money Newsletter.
