A Lot Depends On Your Financial Conditioning

Category: Finance, Financial Planning.

You have achieved financial freedom when you have sufficient passive income to support your lifestyle and you work because you choose to, not because you have to. But it might not be a comfortable process getting there.

There are many" ordinary" people who enjoy financial freedom, and you can be among them. A lot depends on your financial conditioning. A belief is just a thought you keep thinking. You might have to change some beliefs and actions that are familiar to you now and feel like they are based in an objective reality, there is no, when in fact such thing. Beliefs can change, and so can your opinion about what is real and what is possible. Work hard and you will earn a fair income. The financial conditioning for the majority of people goes something like this: Go to work for a stable company and you will have job security.

Avoid debt because all debt is bad. Focus on funding your retirement. Minimize spending and put your money into savings. Retirement planning should pay a fraction of what you made during your working years. For starters, rather than planning for retirement, how about planning for wealth? If these money statements sound familiar- even if they don t ring true, or make sense- then your financial conditioning needs revision in order for you to achieve financial freedom. First step: know exactly where you are right now- your net worth as of today.

List all your liabilities, from mortgage to credit card to student loans. List all your assets, from cash on hand to retirement to home equity. When you find the difference between your assets and liabilities, you know your net worth. Itemize your income and expenses. (By the way, the mortgage on your house is a liability. Next step: know your cash flow. A monthly mortgage payment is an expense) . Once you know your net worth and your cash flow, you have a financial baseline from which to launch your financial freedom plan. [A little incentive for you to do your financial baseline: most people tell me that when they do this inventory, they find money they didn t realize they had.

When you find the difference between income and expenses, you know your cash flow. Years ago, when I first did my financial baseline, I found papers for a fund worth about$ 7000 that I had from an early employer. It depends on your particular situation. I had forgotten about it when I left the company and moved to another city. ] The plan for financial freedom that you design involves sequencing, or doing the right thing at the right time, and there is no formula for that. But in general, you want to start with a focus on creating cash- not on paying down debt. Most people think they have to get debt- free first.

Let me emphasize this because it is the opposite of the way most people think. And yes, you want to, eventually be consumer debt- free, but that might not be your best first move. Think like a wealth builder. Your best first move is to figure out a way to create more cash. How can you take your existing skill set and leverage it? Focus your attention on creating more cash, and then your next move toward financial freedom will become apparent. What could you do right now to make an extra$ 50 or$ 100 or$ 500 dollars a day?

It might be a matter of paying down debt, might be a tax strategy, might be an investment plan. After figuring out your baseline, it s the next logical step. But for the present, increase your income.

Read more...

What Is A 457 Plan - Finance and Financial Planning Articles:

What is a 457 plan? Contributions made to the plan with pre- tax money, and contributions are, earnings tax deferred while under the plan, and contributions are generally made by the employee, although some plans do have contributions by employees as well.

You Will Be In A Lower Tax Bracket When You Retire - Finance and Financial Planning Articles:

We have planned our retirements pretty much the same way for the last 30 years but maybe it is time to design a new paradigm for the future. The dictionary defines a paradigm as a set of assumptions, values, concepts, and practices that constitutes a way of viewing reality for the community that shares them, especially in an intellectual discipline.