Focus on Your Future (Article #5 in a Series of 5)
Taking control of your finances is more than just spending less and earning more money. You must save effectively, get out of debt, and have a great plan for your future. There are five critical steps to follow to help you gain more control of your finances, which are:
- Track Every Penny You Spend
- Develop a Useful Budget
- Start an Emergency Fund
- Get Out of Debt
- Focus on Your Future
In this article, we will focus on the last step in the process, which is: “Focus on Your Future.”
There are three critical areas of focus to consider when trying to establish a successful financial future: 1) Increase your earning power; 2) Focus on your net worth; and 3) Plan for your future. Let’s look at each of these areas in a little more depth.
#1: Increase Your Earning Power.
We have all learned from the dawn of the Information Age that education and training must be an ongoing process throughout the remainder of our lives. It is not only important for our children to be educated, but each one of us must be willing to adapt to a rapidly changing world no matter how old we are.
Take a few minutes to contemplate your current earning situation. Are you earning an amount of money that is adequate for the basic needs of your family? If not, you need to give serious thought to receiving additional training in a more marketable skill. Simply put, unskilled workers do not have as much economic leverage in today’s high tech marketplace as those who are skilled.
If you are making an adequate living, you should still continue to look to the future and review where you may have growth opportunities within your industry. Take the steps necessary to be the most informed and trained you can be and your earning power will continue to increase.
#2: Focus on Your Net Worth.
All of the work you do to improve your financial situation will be manifest in one fundamental way; it will increase your net worth. If your financial activities are not accomplishing this, then you must adjust in some way. As the old saying goes, “it’s not what you make, it’s what you keep.” Whether you are taking steps to save more money, increase your earning power, or eliminate debt, your ultimate objective must be to increase your financial net worth.
To calculate your net worth, add up the current market value of all of your assets (e.g., home, automobiles, stocks, cash and other investments). Then, subtract from that value all of your liabilities or debt (e.g., home mortgage balance, auto loans, credit card debt, student loans, and other personal debt obligations). If you use a money management software program, such as Quicken or Microsoft Money, it will usually provide you with your net worth automatically from the information you put into the system.
Take the time to understand where you currently are. If you currently have a negative net worth, do not panic. You can take steps to improve your financial situation (e.g., get out of debt, increase your income, save more money, etc.), and you will slowly see your net worth improve. Make wise use of bonuses, tax refunds and other financial windfalls. Instead of spending them, put them into productive assets or into paying off debt, and you will be able to make even more progress in your goal of having financial security.
#3: Plan for Your Future
Decide now where you want to be and when. Then, develop a realistic (but aggressive) road map to get there. You must write down how you plan to take control of your financial future. Do not rely on the government, an employer, your church, a friend, or a rich family member to plan it for you. The only person qualified to make decisions about your long-term financial future is you. Be specific and take advantage of the financial tools available to make a difference in your life.
Take a moment to review the five steps we have discussed in the past several articles. Don’t become overwhelmed; start with one step and move on to the next. Eventually, you will begin to see progress and start feeling better about your financial future.