Category Archives: Habits

6 money myths debunked | Fidelity Investment

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Don’t be bamboozled. Believing these myths could hurt your bottom line.  FIDELITY VIEWPOINTS  – 06/30/2021

Key takeaways

  • Establish good saving habits. Be sure to save some money from every paycheck.
  • Invest your savings appropriately for your goals and time frame.
  • Debt isn’t always bad but must be used responsibly.

There is no shortage of bad information out there—and falling for some of it can cost you money. It could be other people who steer you in the wrong direction, or it could be the things you tell yourself. Whatever the source, believing these myths could be hazardous to your financial health.

Myth #1: It’s not worth saving if I can only contribute a small amount

In reality: If you start early, around age 25, saving 15% of your paycheck—including your employer’s match to your 401(k) if you have one—could help you save enough to maintain your current way of life in retirement. It sounds like a lot, but don’t lose your motivation if you can’t save that much. Don’t be discouraged if you start later than age 25. Beginning to save right now and gradually increasing the amount you’re able to put away can help you hit your goals.

Save as much as you can while still being able to pay for essentials like rent, bills, and groceries. Fidelity’s budgeting guidelines may be able to help determine how much you can afford to save and spend.

  • Consider allocating no more than 50% of take-home pay to essential expenses (including housing, debt repayment, and health care).
  • Try to save 15% of pre-tax income (including employer contributions) for retirement.
  • Prepare for the unexpected by saving 5% of take-home pay in short-term savings for unplanned expenses.

Myth #2: The stock market is too risky for my retirement money

In reality: It’s true that money in a savings account is safe from the ups and downs of the stock market. But it won’t grow much either, given that interest rates on savings accounts are typically low. When it’s time to withdraw that money for retirement a few decades from now, your money won’t buy as much because of inflation. The stock market, however, has a long history of growth, making it an important component of your longer-term investment portfolio.

For instance, for a young person investing for retirement, a diversified investment strategy based on your time horizon, financial situation, and risk tolerance could provide the level of growth you need to achieve your goals.

There are a variety of ways to invest. Building a diversified portfolio based on your needs and the length of time you plan to be invested can be as complicated or as simple as you prefer. You can build your own diversified portfolio with mutual funds or exchange-traded funds—or even individual securities.

Even if you choose to manage your own investments, you may not be entirely on your own. 401(k) providers often offer example investment strategies that could give you ideas on how to build a diversified portfolio. You can invest in the funds in the model portfolio in the suggested proportions or you could use the models as a source of inspiration for your own investment ideas.

If you find investing daunting or don’t have the time to figure it out just yet, you might consider a managed account or a target-date fund for savings that are earmarked for retirement.

Myth #3: I’m young, so I don’t need to save for retirement now

In reality: Retirement can feel very far away when you’re young—but having all of those years to save can actually be incredibly powerful. That’s because time and compounding are important factors in a retirement savings plan.

Compounding happens as you earn interest or dividends on your investments and reinvest those earnings. Because the value of your investments is then slightly higher, it can earn even more interest, which is then packed back into the investments, allowing it to grow even more.

Over time, the value can snowball because more dollars are available to benefit from potential capital appreciation. But time is the secret ingredient—if you aren’t able to start saving early in your career you may have to save a lot more in order to make up for the value of lost time.

You can start by contributing to your 401(k) or other workplace savings plan. If your employer matches your contributions, make sure you contribute up to the match—otherwise you’re basically giving up free money. If you don’t have a workplace retirement account, consider opening an IRA to get started.

Myth #4: There’s no way of knowing how much money I’ll need in retirement

In reality: How much you’ll need depends entirely on your situation and what you plan to do when you leave the workplace.

But Fidelity did the math and came up with some general guidelines. Aim to save at least 15% of your pre-tax income every year—including employer contributions. To see if you’re on track, use our savings factor: Aim to have saved at least 1x (times) your income at 30, 3x at 40, 7x at 55, and 10x at 67.* Of course, everyone’s situation is unique and you may find that you need to save more or less than this suggestion.

Read about all of Fidelity’s retirement saving guidelines on Fidelity.com: Retirement roadmap

Don’t worry if you’re not always on track. Saving consistently, increasing your contributions when you’re able, and investing for growth in a diversified mix of investments could help you catch up over time.

Myth #5: All debt is bad

In reality: It’s true that carrying a balance on your credit card or a high-interest loan can cost a lot—significantly more than the amount you initially borrowed. But not all debt will hold you back. In fact, certain types of debt, like mortgages and student loans, could help you move forward in life and achieve your personal goals.

Plus, the interest rates on mortgages and student loans are typically much lower than those on personal loans or credit cards, and the interest may be tax-deductible.

No matter what kind of debt you take on, make sure you shop around for the best rates and never borrow more than you can afford to pay back on time.

Myth #6: Credit cards should be avoided

In reality: As long as you pay off your card balance in full each month to avoid interest, making purchases with credit can be worthwhile. Many credit cards offer a rewards program. If you make all your everyday purchases with your card, you could quickly rack up points you can redeem for cash, travel, electronics, or to invest.

Also, demonstrating that you use credit responsibly can help you increase your credit score, making it easier to buy a car or a home later on. It may even earn you a lower interest rate when you borrow in the future. It can be difficult to dig out of credit card debt, but if you control your spending and pay the card off every month, it could pay you back.

References:

  1. https://esj.seniormbp.com/SeniorApps/facelets/registration/loginCenter.xhtml

A Wealth of Wisdom

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“By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals.” Warren Buffet

Warren E. Buffett, Chairman and CEO of Berkshire Hathaway Inc., and Charlie T. Munger, Vice Chairman of Berkshire Hathaway Inc., provide “A Wealth of Wisdom” in this CNBC video:

https://youtu.be/rQJWHocG-50

Berkshire owns American-based property, plant and equipment – the sort of assets that make up the “business infrastructure” of the U.S. – with a GAAP valuation exceeding the amount owned by any other U.S. company. Berkshire’s depreciated cost of these domestic “fixed assets” is $154 billion.

 

References:

  1. https://berkshirehathaway.com/2020ar/2020ar.pdf

6 Habits to Build Wealth

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“If your goal is to become financially secure, you’ll likely attain it…. But if your motive is to make money to spend money on the good life,… you’re never gonna make it.” Thomas Stanley and William Danko

Your financial independence is far more important than showing off your wealth, according to authors of Millionaire Next Door, Thomas Stanley and William Danko. They assert that millionaires frequently remind themselves that those who spend all their income on high-priced luxury items often don’t have much accumulated wealth to their names and tend to live on the paycheck to paycheck treadmill.

Yet, many paths exist to building wealth which have little to do with wages and income. Wealthy people tend to practice daily habits that are designed to protect and grow their assets and help keep their body and mind in balance, according to financial experts who’ve studied subject.

They have found over and over again that you don’t have to be a high-income one-percenter to be wealthy. Many wealthy individuals never made more than $60,000 to $70,000 per year, but did a very good job of managing their expenses, cash flow and spending behavior. “Many people who live in expensive homes and drive luxury cars do not actually have much wealth”, according to Thomas and Danko. “Then, we discovered something even odder: Many people who have a great deal of wealth do not even live in upscale neighborhoods.”

Wealthy individuals generated several million dollars of net worth, simply because they started financial planning early in life, they saved as aggressively as they could afford to, and they invested that money in assets and stayed invested over the long. In short, “one of the reasons that millionaires are economically successful is that they think differently.”

Live Below Your Means and Practice Gratitude

“Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and, most of all, self-discipline.” Thomas Stanley and William Danko

Related to not showing off your wealth, authors Stanley and Danko found that the vast majority of millionaires didn’t spend a lot of money and were grateful for things they did own and the lifestyle they lived. In fact, they spent well below their means given their fortunes. In addition, the majority of the wealthy reported that they created and followed a personal budget, and created and maintain a gratitude journal. In other words, they respected their wealth, kept their spending on a tight leash and practice gratitude daily.

There are a few key habits of building wealth:

  1. Remember to pay yourself first. Basically, paying yourself first is about having your financial and budgeting ducks in a row. One key to building wealth is creating a budget and sticking to it. Wealthy people know how to hold the line on discretionary spending items that can help them increase the “invest” portion of their monthly budget.
  2. Look ahead at your goals. Wealthy people typically set concrete goals, both personal and financial, and have a long-term focus that looks years, if not decades, down the road. The more specific the goals and the longer term the goals are, the better. The wealthy understand that it begins with setting personal goals—what you want to get out of life and how you might prioritize your list. And once you have an idea what you want to accomplish personally, you can plot a financial road map to help steer you there. In other words, the path to wealth involves starting early, and focusing on the long term.
  3. Do your homework; keep your cool. Markets go up, and markets go down—often suddenly and for no apparent reason. Define your comfort level with risk, keep your emotions in check, and recognize what you can and can’t control. According to Siuty, there’s no “secret sauce,” except that, to build wealth, it helps to “stay disciplined, be methodical, and not let emotions get the better of you.”
  4. Lead a non-lavish lifestyle. Despite the popular characterization of rich people throwing money wantonly around in movies and TV, in reality, wealthier folks actually tend to look for value in their purchases. They generally understand the difference between price and value. In other words, they’re not afraid to open the pocketbook, but they tend to expect value in return.
  5. Always expand your education. Education is one of the keys to success, and reading is one of the most efficient ways to learn. According to Thomas Corley, author of Rich Habits: 67% of the rich watch TV for one hour or less a day. Only 6% of the wealthy watch reality shows, he wrote, while 78% of the poor do. And, 86% of the wealthy “love to read,” with most of them reading for self-improvement.
  6. Get up early, eat healthy, exercise. The wisdom that “time is money” goes all the way back to Benjamin Franklin, so it’s no surprise that the wealthy tend to wake early and make the most of their time. The other aphorism the wealthy take to heart is “health is wealth.” According to Corley, 57% of wealthy people count calories every day, while 70% eat fewer than 300 calories of junk food per day. Some 76% do aerobic exercise at least four days per week.
  7. Practice Gratitude. Gratitude makes people more optimistic and positive. It improves relationships, which is strongly correlated with financial success, as well as health, happiness and longevity. And, grateful people are less likely to purchase things they don’t need and that can help them save more! The bottom line is this: It doesn’t matter how much you have if you don’t appreciate it! Without gratitude, you’ll never feel successful and wealthy, no matter your net worth. So regardless of your level of financial success, practicing gratitude is essential.

Seeking a life of balance in mind and body, creating measurable goals, and prioritizing saving and investing, can help put you on the right path, and help keep you from straying from that path. And the earlier you start, the better.

References ‘

  1. https://tickertape.tdameritrade.com/personal-finance/behavior-wealthy-habits-rich-16001
  2. https://brandongaille.com/the-millionaire-next-door-summary/
  3. https://www.fool.com/investing/best-warren-buffett-quotes.aspx
  4. https://partners4prosperity.com/thank-and-grow-rich-gratitude-and-wealth/

Greater Fool Theory | Motley Fool

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“Greater fool theory states that investors can achieve positive returns by buying an asset without concern for valuation fundamentals and other important factors because someone else will buy it at a higher price.”

Simply stated, investors expect to make a profit on the stocks they purchase because another investor (the “greater fool”) will be willing to pay even more for the stock, regardless if the stock’s price is overvalued based on fundamentals analysis or long-term performance outlooks.

According to The Motley Fool, this philosophy relies on the expectation that someone else will get caught up in market momentum (frenzy) or have their own reasons for why the asset is worth more than the price you paid. 

In the short term, popular sentiment plays the biggest role in shaping stock market pricing action, but fundamental factors including revenue, earnings, cash flow, and debt determine how a company’s stock performs over longer periods.

In short, it is possible to achieve strong returns by using the greater fool theory, but it’s risky and far from the best path to achieving strong long-term performance. 

Specifically with regard to the stock market, the Greater Fool Theory becomes relevant when the price of a stock goes up so much that it is being driven by the expectation that buyers for the stock can always be found, not by the intrinsic value (cash flows) of the company.

The Greater Fool Theory is a very risky, speculative strategy that is not recommended especially for long-term investors.

References:

  1. https://www.fool.com/investing/how-to-invest/greater-fool-theory/
  2. https://www.hartfordfunds.com/investor-insight/the-greater-fool-theory-what-is-it.html

Paying Yourself First

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“Don’t save what is left after spending; spend what is left after saving.” Warren Buffett

Automated saving and ‘paying yourself first’ are probably the top two things Americans can do to create wealth and financial security. Paying yourself first is often referred to as “the golden rule of personal finance.” Paying yourself first means saving before you do anything else with your paycheck, like paying bills, buying groceries, or shopping. You allocate a percentage of your pay or income to a savings or investment account. Paying yourself first prioritizes savings and investing, but not at the expense of necessary expenses like housing, utilities and insurance.

Too many people try to save in a way that’s exactly backward. They spend first and then attempt to save what left at the end of the month or save up toward the end of the year.

The far more powerful way to save and invest is to set aside a percentage of your income every pay period — recommended 15% to 20% or more — and to save and invest it automatically.

Accumulating Wealth

Most of the folks who have accumulated wealth got there by systematically socking away a reasonable percentage of their pay into a broad array of stocks and keep doing it for decades.

The key take-aways are to make your savings an automatic deposit so you don’t get a chance to change your mind and spend it. And, spend what’s left and you’re certain to be on the right path to build wealth for tomorrow. Additionally, don’t forget to invest it!

By saving first, you eliminate the problem of not having enough money to save at the end of the month. Setting up automatic deposit into savings or brokerage accounts, you can secure your financial future and build wealth.

“Why would you wake up in the morning, leave your family, not do what you want with your day, go to work all day long for 8, 9, 10 hours a day, commute back home, get up and do it all over again? Why would you do this 5 days a week, 4 weeks out of the month, 12 months out of the year? Why would you do all that to earn money and not pay yourself first?

Most people pay everyone else before themselves: the government, their creditors, and their bill collectors. Everybody else gets paid first and then if anything’s left over, then they pay themselves.

That system stinks and is designed for you to fail financially. If that’s the system you’re using right now, and you don’t have money, that’s why. The odds are set up against you. It’s too tough for you to get rich if you’re paying everybody else first. You need to change this.

You need to completely redirect your income so the first person who gets paid is you.” David Bach, The Automatic Millionaire

Prioritize savings

If you deposit money directly into savings or brokerage account every time you get paid, you may be less likely to spend it on your everyday expenses. Following this system can help you foster a habit of saving that will add up over time and help you be prepared for retirement or unexpected expenses.

A good target is to save 10 – 15% of your take-home pay and put it toward your savings and investment goals. Saving even $125 or $150 a month is one small step you can take to help you get into the habit.

“The first bill you pay each month should be to yourself.”

By paying yourself first, you make saving a top priority. You make it a priority to pay your savings and investment accounts first, before making the first monthly payment or paying the first bill.

Most people say they don’t save enough money for retirement, or invest enough, or save a big enough emergency fund, because they don’t have the money to save more. That’s why personal finance advice says that you should pay into those savings and brokerage accounts first. Treat it like a bill. Approach it the same way that you treat your phone bill or your electric bill.

Most people wait and only save what’s left over after paying bills or spending on other discretionary items—that’s paying yourself last. Conversely, before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income to save. Put the money into your 401(k), your Roth IRA, or your savings account.

Automate Your Savings

A quick way to begin paying yourself first is by setting up an automatic transfer to a savings or retirement account every time you receive a direct deposit, like a paycheck.

Most people wait and only save what’s left over after paying bills or spending on other discretionary items—that’s paying yourself last. Conversely, before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income to save. Put the money into your 401(k), your Roth IRA, or your savings account.

Paying yourself first makes saving money and investing in assets a priority without sacrificing other financial needs and obligations. No matter what your level of earning or responsibilities are, you can afford to pay yourself first with a few small changes.

Most people wait and only save what’s left over after paying bills or spending on other discretionary items—that’s paying yourself last. Conversely, before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income to save. Put the money into your 401(k), your Roth IRA, or your savings account.

Most people wait and only save what’s left over after paying bills or spending on other discretionary items—that’s paying yourself last. Conversely, before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income to save. Put the money into your 401(k), your Roth IRA, or your savings account.

Most people wait and only save what’s left over after paying bills or spending on other discretionary items—that’s paying yourself last. Conversely, before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income to save. Put the money into your 401(k), your Roth IRA, or your savings account.

Most people wait and only save what’s left over after paying bills or spending on other discretionary items—that’s paying yourself last. Conversely, before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income to save. Put the money into your 401(k), your Roth IRA, or your savings account.

“Paying yourself first should really be called investing in yourself first.”

Source:

  1. https://www.marketwatch.com/story/the-huge-financial-force-even-albert-einstein-missed-2019-12-10

Retirement Readiness and Cash Flow

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Building wealth is essential to accomplish a variety of goals like retiring in lifestyle you desire.

Retirement Comes First

It can be tempting to put your saving and investing for retirement on the back burner by paying for your child’s college education, helping your adult children with living expenses, or paying for a wedding. But it is incredibly important that you prioritize and put your retirement savings first. While loans are available for things like college education and home improvement, there are no loans or money growing on trees to finance your long-term retirement.

Dipping into your retirement tax deferred accounts can be equally tempting — such as cashing out your 401(k) when you leave a job or tapping it if you’re strapped for funds. You might also think about withdrawing funds as soon as the early withdrawal penalty disappears at age 59½.

Think twice! Even without early withdrawal penalties, federal and state income taxes can eat up a big chunk of what you withdraw, and you will lose all the possible growth of that money over the long term.

When you retire matters

Make sure you, your partner and your adult children are on the same page regarding your retirement timing and your financial planning. Sit down and have a conversation with your family about your changing priorities and goals as you near retirement.

“During Americans early years in retirement, many retirees end up spending as much as or more than they did when they were working,” says Jennipher Lommen, a certified financial planner in Santa Cruz, Calif. And, when and at what age you decide to retire matters greatly. If you retire before age 65, you’ll need to pay more for your health care before you’re eligible for Medicare benefits.

What is your retirement number

When it comes to retirement, it’s what you spend and your cash flow that matters most. Base your retirement needs and number on 100% of your pre-retirement expenses — plus 10%.

A rule of thumb to retirement savings states that you’ll need to save about 20x your gross annual income to retire. In other words, if you earn $50,000 per year, you’ll need $1,000,000 to retire. This is a good rule of thumb, however, it is expenses are what matter.

To come up with your own number for income (or cash flow requirement to cover your expenses) during retirement, you need to figure out how much you’ll actually spend in retirement, which means coming up with a comprehensive retirement budget. Only then can you determine whether your savings, pensions and other sources of retirement income are sufficient to finance the lifestyle you’ve envision.

The wealthy, according to Thomas J. Stanley, author of the best selling book, “The Millionaire Next Door,” have several financial habits in common when it comes to spending, saving, investing and accumulating wealth. One key commonality: They started early saving, investing and building wealth when they were young.

Give some serious thought to how you’ll spend your time—and money—once you stop working. The first few years of retirement are often referred to as the “go-go years”. It’s the period when many retirees are still in relatively good health and eager to do all of the activities they didn’t have time to do when they were working.

Retirees “always spend more on travel and entertainment than they thought or projected that they would,” says Jorie Johnson, a CFP in Brielle, N.J.

Creating a budget and sticking to it positions you for success since it creates a job for your dollars. “A common misconception is that budgeting is only for people who are struggling to make ends meet,” says James Kinney, a CFP in Bridgewater, N.J. “A household will feel wealthier and be better able to achieve its goals if it plans and monitors spending.”

If the word budget turns you off, “think of it as a spending plan,” says Lauren Zangardi Haynes, a CFP in Richmond, Va. “You choose where to allocate your monthly spending in line with what’s important to you.”

Get Organized

It’s not unusual for one partner to take sole responsibility for managing finances. However, when you’re married, planning your retirement needs to be a dual effort. Make sure each person is aware of financial plans and cash flow requirements, since both will be affected by the decisions that have been made.

It’s essential to organize your financial records. Work together with your spouse to gather records for each: bank account, credit card, retirement account, insurance policy, loan, mortgage, or other property (like cars). By the end of this exercise, you should both understand what assets you have and what debts you owe.

Many assets — like retirement plans, banking accounts, investment accounts, and insurance proceeds — let you name a beneficiary who will immediately become the owner of that asset when you pass away. The more assets you can transfer to beneficiaries, the fewer assets you’ll need to send through probate*, and the more effectively you can care for your life partner and family in the event of your or your spouse’s unexpected death.

But for all of this to work, you must make sure that your beneficiary designations are up to date. Assets that transfer directly to a beneficiary when you die are said to “pass outside” or “pass over” your Will.

Update your beneficiary designations:

  1. Go to your bank and ask to set up a POD, or Payable-On-Death, designation for any accounts that are held solely in your name. Joint accounts will automatically pass to the survivor listed on the account.
  2. Check the beneficiary designation for any of your retirement accounts.
  3. Do it today

Your vision for retirement is unique to you and your spouse.  The role of money in retirement is to provide security and freedom. Over half of retirees wish they had budgeted more for unexpected expenses, according to Edward Jones. So, don’t delay and start planning and preparing for retirement today.

References:

  1. https://www.kiplinger.com/slideshow/retirement/t047-s002-make-sure-you-have-enough-money-in-retirement/index.html
  2. https://www.kiplinger.com/slideshow/saving/t037-s003-money-smart-ways-to-build-your-wealth/index.html
  3. https://www.edwardjones.com/us-en/market-news-insights/retirement/new-retirement

Saving for the Future

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“Don’t just save money, save for your future and with purpose.” America Saves

Many Americans spend more than they save, and nearly one in five people are saving less than 5 percent of their income according to a Bankrate’s 2015 Financial Security Index survey.

Saving money isn’t the easiest thing to do, especially if you’re one of the many of Americans living paycheck to paycheck. Yet, saving for the future remains a vitally important endeavor — not just to enable you to make large discretionary purchases such as a big screen television or a luxury vacation, but for emergencies, living a life of dignity in retirement, or buying a home.

Many Americans have more month left than money

And, unfortunately, many Americans aren’t where they should be financially. A 2019 Charles Schwab Modern Wealth survey found that about 59 percent of American adults are living paycheck to paycheck.

If you’re having a hard enough time paying the bills and making rent payments without racking up debt, saving for the future is probably the last thing on your mind. Only 38% of people have an emergency fund, according to Charles Schwab, and one in five Americans don’t have a dime saved for retirement, according to a survey from Northwestern Mutual.

Building a “cash cushion” is an important step towards financial freedom. A cash cushion, or emergency fund, is essential if you want enough cash on hand to cover three to six months’ essential expenses.

A well-rounded savings strategy should focus on both short-term and long-term goals, says personal financial expert, Carrie Schwab-Pomerantz CFP®. And, if you can make moves to save extra dollars, they should be used in two ways: to pay off debt (credit cards and student loans) and to save.

The first step is to set a clear savings goal. Having this savings goal will help you when it comes to setting aside a specific amount every month or year in order to reach that milestone. Whatever your goal, the amount you set aside to get started does not have to be large. To jump-start your savings, consider automating your accounts to transfer the budgeted amount to your savings each month.

“Save and invest too little, and you might not be able to retire. Save and invest too much, and you may decide to retire early.” Vanguard Investments

Once you’ve set your savings goals, it’s time to start saving. Here are seven tips for saving:

  1. Make savings a priority. Each time you’re paid, put a portion of it toward savings. Saving money is a good habit no matter how much or how little you put away each month.
  2. Pay yourself first. Think of saving as paying yourself. In other words, before you spend your first dollar on monthly expenses, first you should set aside 10% to 15% of income for your savings.
  3. Automate your savings. Most financial institutions allow you to automatically transfer funds online or via mobile apps from checking to savings accounts.
  4. An emergency fund is a must. You will need an emergency fund somewhere in the ballpark of three to six months of your income. According to America Saves, and their motto ‘Start Small. Think Big’, they recommend starting with an emergency fund savings goal of just $500. 
  5. Find money to save. Keep track of everything you spend for a week – you’ll be surprised where the money goes. Adjust your spending habits a little and suddenly, you’re saving. And, don’t simply spend less. Save with a purpose, such as college expenses, retirement, or for emergencies.
  6. Keep the change. Some supermarkets have machines that count your coins and give you cash in exchange for a small fee. Gather up your spare change, pour it into the kiosk and see how much your coins add up to. Instead of spending it right away, consider diverting your newfound funds to savings.
  7. Cancel extra costs. Check to see if you have any old subscriptions that you’re not using anymore – whether it’s to a gym, magazine, or streaming service that you no longer use. Many services that you may no longer want could cost you hundreds of dollars per year.

Compound Interest

Interest can build your wealth for you. For example, if you deposit $100 in a savings account that offers 6 percent interest, by the end of the year your savings will have grown to $106. Compound interest can enhance these savings even more by earning interest on interest. With compound interest, the $106 you have after the first year would earn 6 percent again the next year: $6.36, or a 36-cent increase. Add that to the total, and you would have $112.36. If you leave your money in a 6 percent interest account for 40 years, you’ll have $1,028, over ten times the original amount.

The Rule of 72

Want to double your money? Use the “Rule of 72” mathematical formula to find out how long it will take to grow your money. First, divide 72 by your account’s fixed annual interest rate. For example, if your rate is 6 percent, divide 72 by 6. At that rate, it will take 12 years to double your savings. When you think about your financial goals, the Rule of 72 can make a positive impact on your savings over time by helping you make informed decisions.

Micro-saving

There’s a way to effortlessly save money, and turn tiny amounts into big savings.

Micro-saving is the process of regularly saving small amounts of money over time, and it’s something you can do nearly every day. You don’t have to earn a huge income to grow your savings, and better yet, it’s never too late to start.

There are many ways to micro-save — some simpler than others like “rounding up” and saving cashback rewards. These methods requires you to consistently transfer any redeemed cashback rewards from credit cards to a savings account — instead of opting for a gift card.

Perhaps the easiest micro-saving method of them all is via electronic automation. Several apps, like Digit and Acorns, make it foolproof to save spare change, but they charge fees.

Key Point

Starting small and starting now can make savings add up faster than you’d think.

The easiest way to save is to save automatically! Contact your employer to set up a direct deposit into savings each pay period or ask your bank to set up an automatic transfer from your checkings to your savings.

References:

  1. https://www.bustle.com/life/3-women-share-how-theyre-saving-for-their-big-life-goals
  2. https://money.cnn.com/2015/03/30/pf/income-saving-habits/
  3. https://content.schwab.com/web/retail/public/about-schwab/Charles-Schwab-2019-Modern-Wealth-Survey-findings-0519-9JBP.pdf
  4. https://news.northwesternmutual.com/2018-05-08-1-In-3-Americans-Have-Less-Than-5-000-In-Retirement-Savings
  5. https://www.practicalmoneyskills.com/learn/saving/growing_your_money
  6. https://communities.usaa.com/t5/Your-Future/The-Magic-of-Micro-Saving/ba-p/201610

Financial Planning 12 Step Process

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A financial plan creates a roadmap for your money and helps you achieve your financial goals.

The purpose of financial planning is to help you achieve short- and long-term financial goals like creating an emergency fund and achieving financial freedom, respectively. A financial plan is a customized roadmap to maximize your existing financial resources and ensures that adequate insurance and legal documents are in place to protect you and your family in case of a crisis. For example, you collect financial information and create short- and long-term priorities and goals in order to choose the most suitable investment solutions for those goals.

Although financial planning generally targets higher-net-worth clients, options also are available for economically vulnerable families. For example, the Foundation for Financial Planning connects over 15,000 volunteer planners with underserved clients to help struggling families take control of their financial lives free of charge.

Research has shown that a strong correlation exist between financial planning and wealth aggregation. People who plan their financial futures are more likely to accumulate wealth and invest in stocks or other high-return financial assets.

When you start financial planning, you usually begin with your life or financial priorities, goals or the problems you are trying to solve. Financial planning allows you to take a deep look at your financial wellbeing. It’s a bit like getting a comprehensive physical for your finances.

You will review some financial vital signs—key indicators of your financial health—and then take a careful look at key planning areas to make sure some common mistakes don’t trip you up.

Structure is the key to growth. Without a solid foundation — and a road map for the future — it’s easy to spin your wheels and float through life without making any headway. Good planning allows you to prioritize your time and measure the progress you’ve made.

That’s especially true for your finances. A financial plan is a document that helps you get a snapshot of your current financial position, helps you get a sense of where you are heading, and helps you track your monetary goals to measure your progress towards financial freedom. A good financial plan allows you to grow and improve your standing to focus on achieving your goals. As long as your plan is solid, your money can do the work for you.

A financial plan is a comprehensive roadmap of your current finances, your financial goals and the strategies you’ve established to achieve those goals. It is an ongoing process to help you make sensible decisions about money, and it starts with helping you articulate the things that are important to you. These can sometimes be aspirations or material things, but often they are about you achieving financial freedom and peace of mind.

Good financial planning should include details about your cash flow, net worth, debt, investments, insurance and any other elements of your financial life.

Financial planning is about three key things:

  • Determining where you stand financially,
  • Articulating your personal financial goals, and
  • Creating a comprehensive plan to reach those goals.
  • It’s that easy!

Creating a roadmap for your financial future is for everyone. Before you make any investing decision, sit down and take an honest look at your entire financial situation — especially if you’ve never made a financial plan before.

The first step to successful investing is figuring out your goals and risk tolerance – either on your own or with the help of a financial professional.

There is no guarantee that you’ll make money from your investments. But if you get the facts about saving and investing and follow through with an intelligent plan, you should be able to gain financial security over the years and enjoy the benefits of managing your money.

12 Steps to a DIY Financial Plan

It’s not the just the race car that wins the race; it also the driver. An individual must get one’s financial mindset correct before they can succeed and win the race. You are the root of your success. It requires:

  • Right vehicle at the right time
  • Right (general and specific) knowledge, skills and experience
  • Right you…the mindset, character and habit

Never give up…correct and continue.

Effectively, the first step to financial planning and the most important aspect of your financial life, beyond your level of income, budget and investment strategy, begins with your financial mindset and behavior. Without the right mindset around your financial well-being, no amount of planning or execution can improve your current financial situation. Whether you’re having financial difficulty, just setting goals or only mapping out a plan, getting yourself mindset right is your first crucial step.

Knowing your impulsive vices and creating a plan to reduce them in a healthy way while still rewarding yourself occasionally is a crucial part of a positive financial mindset. While you can’t control certain things like when the market takes a downward turn, you can control your mindset, behavior and the strategies you trust to make the best decisions for your future. It’s especially important to stay the course and maintain your focus on the positive outcomes of your goals in the beginning of your financial journey.

Remember that financial freedom is achieved through your own mindset and your commitment to accountability with your progress and goals.

“The first step is to know exactly what your problem, goal or desire is. If you’re not clear about this, then write it down, and then rewrite it until the words express precisely what you are after.” W. Clement Stone

1. Write down your goals—In order to find success, you first have to define what that looks like for you. Many great achievements begin as far-off goals, that seem impossible until it’s done. Though you may not absolutely need a goal to succeed, research still shows that those who set goals are 10 times more successful than those without goals. By setting SMART financial goals (specific, measurable, achievable, relevant, and time-bound), you can put your money to work towards your future. Think about what you ultimately want to do with your money — do you want to pay off loans? What about buying a rental property? Or are you aiming to retire before 50? So that’s the first thing you should ask yourself. What are your short-term needs? What do you want to accomplish in the next 5 to 10 years? What are you saving for long term? It’s easy to talk about goals in general, but get really specific and write them down. Which goals are most important to you? Identifying and prioritizing your values and goals will act as a motivator as you dig into your financial details. Setting concrete goals may keep you motivated and accountable, so you spend less money and stick to your budget. Reminding yourself of your monetary goals may help you make smarter short-term decisions about spending and help to invest in your long-term goals. When you understand how your goal relates to what you truly value, you can use these values to strengthen your motivation. Standford Psychologist Kelly McGonigal recommends these questions to get connected with your ideal self:

  • What do you want to experience more of in your life, and what could you do to invite that/create that?
  • How do you want to be in the most important relationships or roles in your life? What would that look like, in practice?
  • What do you want to offer the world? Where can you begin?
  • How do you want to grow in the next year?
  • Where would you like to be in ten years?

Writing your goals out means you’ll be anywhere from 1.2 to 1.4 times more likely to fulfill them. Experts theorize this is because writing your goals down helps you to choose more specific goals, imagine and anticipate hurdles, and helps cement them in your mind.

2. Create a net worth statement—To create a successful plan, you first need to understand where you’re starting so you can candidly address any weak points and create specific goals. First, make a list of all your assets—things like bank and investment accounts, real estate and valuable personal property. Now make a list of all your debts: mortgage, credit cards, student loans—everything. Subtract your liabilities from your assets and you have your net worth. Your ratio of assets to liabilities may change over time — especially if you pay off debt and put money into savings accounts. Generally, a positive net worth (your assets being greater than your liabilities) is a monetary health signal. If you’re in the plus, great. If you’re in the minus, that’s not at all uncommon for those just starting out, but it does point out that you have some work to do. But whatever it is, you can use this number as a benchmark against which you can measure your progress.

3. Review your cash flow—Cash flow simply means money in (your income) and money out (your expenses). How much money do you earn each month? Be sure to include all sources of income. Now look at what you spend each month, including any expenses that may only come up once or twice a year. Do you consistently overspend? How much are you saving? Do you often have extra cash you could direct toward your goals?

4. Zero in on your budget—Your cash-flow analysis will let you know what you’re spending. Zeroing in on your budget will let you know how you’re spending. Write down your essential expenses such as mortgage, insurance, food, transportation, utilities and loan payments. Don’t forget irregular and periodic big-ticket items such as vehicle repair or replacement costs, out of pocket health care costs and real estate taxes. Then write down nonessentials—restaurants, entertainment, even clothes. Does your income easily cover all of this? Are savings a part of your monthly budget? Examining your expenses and spending helps you plan and budget when you’re building an emergency fund. It will also help you determine if what you’re spending money on aligns with your values and what is most important to you.  An excellent method of budgeting is the 50/30/20 rule. To use this rule, you divide your after-tax income into three categories:

  • Essentials (50 percent)
  • Wants (30 percent)
  • Savings (20 percent)

The 50/30/20 rule is a great and simple way to achieve your financial goals. With this rule, you can incorporate your goals into your budget to stay on track for monetary success.

5. Create an Emergency Fund–Did you know that four in 10 adults wouldn’t be able to cover an unexpected $400 expense, according to U.S. Federal Reserve? With so many people living paycheck to paycheck without any savings, unexpected expenses might seriously throw off someone’s life if they aren’t prepared for the emergency. It’s important to save money during the good times to account for the bad ones. This rings especially true these days, where so many people are facing unexpected monetary challenges. Keep 12 months of essential expenses as Emergency Fund or a rainy day fund.  If you or your family members have a medical history, you may add 5%-10% extra for medical emergencies (taking cognizance of the health insurance cover) to the amount calculated using the above formula. An Emergency Fund is a must for any household. Park the amount set aside for contingencies in a separate saving bank account, term deposit, and/or a Liquid Fund.

6. Focus on debt management—Debt can derail you, but not all debt is bad. Some debt, like a mortgage, can work in your favor provided that you’re not overextended. It’s high-interest consumer debt like credit cards that you want to avoid. Don’t go overboard when taking out a home loan. It can be frustrating to allocate your hard-earned money towards savings and paying off debt, but prioritizing these payments can set you up for success in the long run. But, as a rule of thumb, the value of the house should not exceed 2 or 3 times your family’s annual income when buying on a home loan and the price of your car should not exceed 50% of annual income. Try to follow the 28/36 guideline suggesting no more than 28 percent of pre-tax income goes toward home debt, no more than 36 percent toward all debt. This is called the debt-to-income ratio. If you stick to this ratio, it will be easier to service your loans/debt. Borrow only as much as you can comfortably repay. If you have multiple loans, it is advisable to consolidate all loans into a single loan, that has the lowest interest rate and repay it regularly.

“Before you pay the government, before you pay taxes, before you pay your bills, before you pay anyone, the first person that gets paid is you.” David Bach

7. Get your retirement savings on track—Whatever your age, retirement planning is an essential financial goal and retirement saving needs to be part of your financial plan. Although retirement may feel a world away, planning for it now is the difference between a prosperous retirement income and just scraping by. The earlier you start, the less you’ll likely have to save each year. You might be surprised by just how much you’ll need—especially when you factor in healthcare costs. To build a retirement nest egg, aim to create at least 20 times your Gross Total Income at the time of your retirement. This is necessary to keep up with inflation. But if you begin saving early, you may be surprised to find that even a little bit over time can make a big difference thanks to the power of compounding interest. Do not ignore ‘Rule of 72’ – As per this rule, the number 72 is divided by the annual rate of return on investment to determine the time it may take to double the money invested. There are several types of retirement savings, the most common being an IRA, a Roth IRA, and a 401(k):

  • IRA: An IRA is an individual retirement account that you personally open and fund with no tie to an employer. The money you put into this type of retirement account is tax-deductible. It’s important to note that this is tax-deferred, meaning you will be taxed at the time of withdrawal.
  • Roth IRA: A Roth IRA is also an individual retirement account opened and funded by you. However, with a Roth IRA, you are taxed on the money you put in now — meaning that you won’t be taxed at the time of withdrawal.
  • 401(k): A 401(k) is a retirement account offered by a company to its employees. Depending on your employer, with a 401(k), you can choose to make pre-tax or post-tax (Roth 401(k)) contributions. Calculate how much you will need and contribute to a 401(k) or other employer-sponsored plan (at least enough to capture an employer match) or an IRA.

Ideally, you should save 15% to 30% from your net take-home pay each month, before you pay for your expenses. This money should be invested in assets such as stocks, bonds and real estate to fulfil your envisioned financial goals. If you cannot save 15% to 30%, save what you can and gradually try and increase your savings rate as your earnings increase. Whatever you do, don’t put it off.

After retiring, follow the ‘80% of the income rule’. As per this rule, from your investments and/or any other income-generating activity, you need to generate at least 80% of the income you had while working. This will ensure that you can take care of your post-retirement expenses and maintain a comfortable standard of living. So make sure to invest in productive assets.

8. Check in with your portfolio—If you’re an investor, when was the last time you took a close look at your portfolio? If you’re not an investor, To start investing, you should first figure out the initial amount you want to deposit. No matter if you invest $50 or $5,000, putting your money into investments now is a great way to plan for financial success later on. Market ups and downs can have a real effect on the relative percentage of stocks and bonds you own—even when you do nothing. And even an up market can throw your portfolio out of alignment with your feelings about risk. Don’t be complacent. Review and rebalance on at least an annual basis. As a rule of thumb, your equity allocation should be 100 minus your current age – Many factors determine asset allocation, such as age, income, risk profile, nature and time horizon for your goals, etc. But you could broadly follow the formula: 100 minus your current age as the ratio to invest in equity, with the rest going to debt. And, never invest in assets you do not understand well.

  • Good health is your greatest need. Without good health, you can’t enjoy anything else in life.

9. Make sure you have the right insurance—As your wealth grows over time, you should start thinking about ways to protect it in case of an emergency. Although insurance may not be as exciting as investing, it’s just as important. Insuring your assets is more of a defensive financial move than an offensive one. Having adequate insurance is an important part of protecting your finances. We all need health insurance, and most of us also need car and homeowner’s or renter’s insurance. While you’re working, disability insurance helps protect your future earnings and ability to save. You might also want a supplemental umbrella policy based on your occupation and net worth. Finally, you should consider life insurance, especially if you have dependents. Have 10 to 15 times of annual income as life insurance – If you are the bread earner of your family, you should have a tem life insurance coverage of around 10 to 15 times your annual income and outstanding liabilities. No compromise should be made in this regard. Review your policies to make sure you have the right type and amount of coverage. Here are some of the most important ones to get when planning for your financial future.

  • Life insurance: Life insurance goes hand in hand with estate planning to provide your beneficiaries with the necessary funds after your passing.
  • Homeowners insurance: As a homeowner, it’s crucial to protect your home against disasters or crime. Many people’s homes are the most valuable asset they own, so it makes sense to pay a premium to ensure it is protected.
  • Health insurance: Health insurance is protection for your most important asset: Your health and life. Health insurance covers your medical expenses for you to get the care you need.
  • Auto insurance: Auto insurance protects you from costs incurred due to theft or damage to your car.
  • Disability insurance: Disability insurance is a reimbursement of lost income due to an injury or illness that prevented you from working.

10. Know your income tax situation—Taxes can be a drag, but understanding how they work can make all the difference for your long-term financial goals. While taxes are a given, you might be able to reduce the burden by being efficient with your tax planning. Tax legislation tend to change a number of deductions, credits and tax rates. Don’t be caught by surprise when you file your last year’s taxes. To make sure you’re prepared for the tax season, review your withholding, estimated taxes and any tax credits you may have qualified for in the past. The IRS has provided tips and information at https://www.irs.gov/tax-reform. Taking advantage of tax sheltered accounts like IRAs and 401(k)s can help you save money on taxes. You may also want to check in with your tax accountant for specific tax advice.

11. Create or update your estate plan—Thinking about estate planning is important to outline what happens to your assets when you’re gone. To create an estate plan, you should list your assets, write your will, and determine who will have access to the information. At the minimum, have a will—especially to name a guardian for minor children. Also check that beneficiaries on your retirement accounts and insurance policies are up-to-date. Complete an advance healthcare directive and assign powers of attorney for both finances and healthcare. Medical directive forms are sometimes available online or from your doctor or hospital. Working with an estate planning attorney is recommended to help you plan for complex situations and if you need more help.

12. Review Your Plans Regularly–Figuring out how to create a financial plan isn’t a one-time thing. Your goals (and your financial standing) aren’t stagnant, so your plan shouldn’t be either. It’s essential to reevaluate your plan periodically and adjust your goals to continue setting yourself up for success. As you progress in your career, you may want to take a more aggressive approach to your retirement plan or insurance. For example, a young 20-something in their first few years of work likely has less money to put into their retirement and savings accounts than a person in their mid-30s who has an established career. Staying updated with your financial plan also ensures that you hold yourself accountable to your goals. Over time, it may become easy to skip one payment here or there, but having concrete metrics might give you the push you need for achieving a future of financial literacy. After you figure out how to create a monetary plan, it’s good practice to review it around once a year.

Additionally, take into account factors such as the following:

  • The number of years left before you retire
  • Your life expectancy (an estimate, based on your family’s medical history)
  • Your current basic monthly expenditure
  • Your existing assets and liabilities
  • Contingency reserve, if any
  • Your risk appetite
  • Whether you have adequate health insurance
  • Whether you have provided for other life goals
  • Inflation growth rate

A financial plan isn’t a static document to sit on — it’s a tool to manage your money, track your progress, and one you should adjust as your life evolves. It’s helpful to reevaluate your financial plan after major life milestones, like getting m arried, starting a new job or retiring, having a child or losing a loved one.

Financial planning is a great strategy for everyone — whether you’re a budding millionaire or still in college, creating a plan now can help you get ahead in the long run, especially if you want to make a roadmap to a successful future.

For additional financial planning resources to create your own financial plan, go to the MoneySense complete financial plan kit.

References:

  1. https://www.pewtrusts.org/en/research-and-analysis/articles/2017/04/06/can-economically-vulnerable-americans-benefit-from-financial-capability-services
  2. https://www.forbes.com/sites/forbesfinancecouncil/2020/05/26/your-mindset-is-everything-when-it-comes-to-your-finances/?sh=22f5cb394818
  3. https://www.schwab.com/resource-center/insights/content/10-steps-to-diy-financial-plan
  4. https://www.principal.com/individuals/build-your-knowledge/build-your-own-financial-plan-step-step-Guide
  5. https://mint.intuit.com/blog/planning/how-to-make-a-financial-plan/
  6. https://www.federalreserve.gov/publications/files/2017-report-economic-well-being-us-households-201805.pdf
  7. https://news.stanford.edu/news/2015/january/resolutions-succeed-mcgonigal-010615.html
  8. https://www.investec.com/content/dam/united-kingdom/downloads-and-documents/wealth-investment/for-myself/brochures/financial-planning-explained-investec-wealth-investment.pdf
  9. https://www.sec.gov/investor/pubs/tenthingstoconsider.html
  10. https://www.nerdwallet.com/article/investing/what-is-a-financial-plan
  11. https://www.axisbank.com/progress-with-us/money-matters/save-invest/10-rules-of-thumb-for-financial-planning-and-wellbeing
  12. https://twocents.lifehacker.com/10-good-financial-rules-of-thumb-1668183707

 

Financial Literacy: Six Principles of Personal Finance | TD Ameritrade

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Imagine operating a boat without the basic understanding of nautical rules of the road or even how to operate a boat. Scary thought.

Here’s another scary circumstance – one that is all too real. Many Americans are making financial decisions with minimal financial knowledge of investing, budgeting, and credit. The TIAA Institute conducted a survey on U.S. financial literacy, asking 28 basic questions about retirement saving, debt management, budgeting, and other financial matters. The average respondent answered only about half of the questions correctly.

Another study, conducted by Pew Research, found that one in four Americans say that they won’t be able to pay their bills on time this month.

It has been said that knowledge is power, and if that’s true, then too many Americans lack the power to control their financial futures. Financial success rarely happens by accident; it is typically the outcome of a journey that starts with education.

Talking about money is one of the most important skills to being a fiscally responsible and a financially literate person. However, 44% of Americans surveyed would rather discuss death, religion or politics than talk about personal finance with a loved one, according to CNBC.

Why? Two major reasons are embarrassment and fear of conflict, even though the consequences can be grave: 50% of first marriages end in divorce, and financial conflict is often a key contributor. Additionally, it is considered rude to discuss money and wealth.

The missing component is financial literacy education and training.

Mastering personal finance requires you to look at your financial situation holistically and come up with a plan for how to manage your money. In this TD Ameritrade video, we’ll look at helpful principles for six personal finance topics:

  1. Budgeting – focus on the big ticket items by cutting cost on the expensive costs such as cars and homes
  2. Saving and investing – be specific about your destination and your plan on achieving your goal and reaching your destination
  3. Debt and Credit – avoid high interest debt and loans on items that will quickly lose value
  4. Reduce taxes – find ways to legally pay less taxes on the income you earn,
  5. Avoid insurance for expenses you can pay out of pocket – purpose of insurance is to protect you in unfortunate scenarios.  60% of all bankruptcy is related to medical expenses
  6. Investing for retirement. – don’t just save for retirement, invest for retirement.

Make high impact adjustments to your finances to improve your financial future.

References:

  1. https://www.cnbc.com/2019/04/30/the-us-is-in-a-financial-literacy-crisis-advisors-can-fix-the-problem.html
  2. https://www.tiaainstitute.org/publication/financial-well-being-and-literacy-midst-pandemic
  3. https://www.pewtrusts.org/en/research-and-analysis/articles/2017/04/06/can-economically-vulnerable-americans-benefit-from-financial-capability-services

Habits for a more Abundant Life

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Two most important:

  • Read at least thirty minutes everyday
  • Know and pursue a goal your passionate about

Intelligence, talent and charm are great, but more often than not these aren’t what separate the wealthiest among us from the poorest.

Instead, the differences are in our daily habits.

Do you realize that these subconscious, second-nature activities make up 40 percent of our waking hours? That means that two out of every five minutes, all day and every day, we operate on autopilot.

It’s true: Habits are neural pathways stored in the basal ganglia, a golf ball-size mass of tissue right in the center of our brains, in the limbic system.

This neural fast lane is meant to save the brain energy: When a habit is formed and stored in this region, the parts of the brain involved in deeper decision-making cease to fully participate in the activity. However, we all know there are good habits and bad habits.

5 habits

We know that habits can either help or hurt your success in life. Bad habits can fester and grow into a lifestyle that takes you away from the things you want to do—and good habits can help you create a life that’s full of action and accomplishment.

If you were to look at someone you respect, someone who’s successful, you would see that they spend each day doing the things that help them accomplish their biggest goals. This isn’t to say they’re perfect—because no one is—but despite the things that are not perfect in their lives, they continue to make moves that have a positive impact. And it starts with their daily habits.

Now, while we can all study successful habits, it’s meaningless if we don’t implement that knowledge. So, according to Kimanzi Constable, here are five daily habits you can adopt to create the life you truly want to live:

1. Plan out your day the night before.

It’s easy to get off track when you don’t have a plan. Without planning what your day will look like, you wake up not knowing what you want to do or accomplish. Spend a little time the night before giving yourself clear goals for the next day. Life rarely works out as planned, but with a plan, you can adjust without losing momentum.

2. Read books and novels to get inspired.

Reading is an essential element in success—books contain so much knowledge. Forming a daily reading habit will expand your knowledge, allow you to learn more about your profession and help you on your journey to success.

3. Make your health and fitness a priority.

What you eat and how much you exercise affects every area of your life. Successful people use their exercise as a time to reset and reinvigorate. And they make smart food choices that will give them the energy they need to accomplish everything on their daily to-do list.

4. Don’t get distracted by what other people are doing.

Other people’s journeys to success can be inspiring; you can learn so much—about their mistakes, their victories, what to do, what not to do. But if you start comparing your progress to theirs, instead of using their stories as inspiration, you can lose focus and fail to keep your eyes on your own mountain top. Realize your journey is unique and can’t be compared. So don’t get stuck in the comparison trap—stay focused on your why.

5. Live each day as if it were the last.

Life is busy, it’s chaotic, and so you tend to want to focus on the future—we all do it, worry about what’s next. But while planning is important, so is living—being fully present.

Life is short, and there’s no guarantee as to when it will end. Successful people live each day as if it were their last and make the most out of each moment—and so should you.

When you look at a big goal, it’s common to get frustrated at the enormity of what you’re trying to accomplish. If you wake up each day determined to spend it forming good habits, you give yourself a better chance at success. So use these five habits as a starting place to build whatever a successful life means to you.

Read more:

  1. https://www.success.com/16-rich-habits/
  2. https://www.moneycrashers.com/productive-habits-wealthy-successful-people/