6 Surprising Ways To Improve Your Financial Success

6 Surprising Ways To Improve Your Financial Success

September 2016

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When you think of your financial life, what’s the first thing that comes to mind?

Chances are it’s the amount in your 401(k) or investment accounts—as if the only way to measure your progress is whether the balance is greater than the last time you logged in. While this exercise may feel important and meaningful, unless you’re retiring in the next month or two, it’s almost completely irrelevant. And even if you are, it’s STILL pretty much meaningless.

Most people engage in their financial lives when there’s an event to consider—tax time or a job change where you have to redo your benefits. Otherwise, avoidance is the name of the game. We get into a rut of checking on balances and pretty much sidestep the rest. But your involvement in your financial life should not be so benign—you can be active in areas that really mean something.

Here are six areas where you can inject some movement where it is most needed.

  1. Acknowledge what you don’t know. There are very few people who are experts in everything and financials are one of those areas where it’s easier to ignore than confront that fact. Why be afraid to ask questions of those who really know? Just make sure that your experts have no hidden agenda or product to sell you. Coming to terms with what you don’t know is freeing and it is certainly a step in the right direction.
  2. How much do you really need in ready cash? The answer is simple: it depends! So if that isn’t unsatisfying enough, consider what factors need to be considered in establishing a prudent number. Are you a one or two earner household? How secure is your job—REALLY? What significant purchases do you expect in the next year (having a baby, new appliances, vacation, child starting college, a move to a new home)? This is not to mention your exposure to risk—think co-insurance and deductibles on everything from health insurance to homeowners to long-term care. Each item needs to be accounted for when you create an appropriate liquid reserve.
  3. The tax impact of your decisions. You can make decisions that can lower your tax bill and add more to your wealth. For example, are you taking advantage of pre-tax opportunities at work? This could range from mass transit cards to flexible spending accounts. What about donating the piles of old clothes, stacks of books or furniture sitting in the basement (or costing you storage fees) that you’re just not using? Most importantly, be aware of changes in the tax law that will impact your bill.
  4. Being over or under insured. There’s nothing easier than renewing insurance. Just check the box and send it in. This goes for warrantees and other service contracts. But what do you REALLY need and how much risk does it take off your worrying mind? Every renewal should be an occasion to discuss, shop and decide what is really important. Insure against the big risks! As your wealth increases, your needs in certain areas should decrease since you’ll have the capital to self-insure. Areas like disability, life and long-term care can be significant risks, depending on your specific situation.
  5. Goal-based planning. Funding college education, retirement or the purchase of a new home are all examples of goals-based planning. These goals require time and a pathway to succeed—or your chances of reaching the desired outcomes are greatly diminished. What goals do you have for yourself and your family?
  6. Reassess ‘wants’ and ‘needs’. Somehow, as income increases so does spending. It’s like a magic trick—how did THAT happen? But it’s human nature as you feel more financial comfort to devote less time restricting spending. And suddenly items that would not be on the radar become a need. Have a thorough and honest conversation about spending creep and whether the value you receive for those outbound dollars is in alignment with your values.

Your financial success is more about focusing your actions on things that make a difference—not on checking your monthly 401(k) balance. Take your time and add one action at a time; you’ll see that you can make a visible impact on your financial success.

 

This article was written by Michael F. Kay from Forbes and was legally licensed through the NewsCred publisher network.

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