Pay Yourself First

7 Principles of Financial Success

If you think that there are secrets about money that others know and you don’t, you’re right! Want to know what they are?

The 7 principles of financial success contain the secrets that will help you gain financial freedom and give you a firm foundation for your financial success. These time honored principles have helped many just like you. Isn’t it about time you had the inside information, too?

Principle #1 – Understand Cash Flow

To a business, cash flow is incredibly important. Without proper cash flow, they lose their ability to make money. What most people don’t realize is that households are similar. If a household has bad cash flow habits, it loses its ability to function.

Improper cash flow causes debt, creates frustration, and destroys the foundation on which all money opportunities are built. Understanding cash flow must always be the first step in any financial matter. Each person has created their money habits over the years.

And each family needs to develop their own cash flow system. Their system will show what their priorities are in their spending habits. Understanding your cash flow will allow you to take advantage of financial opportunities.

Principle #2 – Debt Management

As a society, we want it and we want it now! We can’t wait until we save for it. Credit is easy. But at what cost? We know debt mortgages our future, yet we still justify purchases our on credit.

There may be legitimate reasons for incurring debt, like buying a house or a car.However, for many people debt is a way to get something right now that they cannot afford.

Debt is a bigger problem than most families will admit. It causes more challenges than just being a drain on resources. Debt causes emotional and physical problems, and may even damage family and spousal relationships.

Escaping your debt spiral will give you back your freedom and self-respect. It’s vital that you work toward becoming debt-free. And what’s just as important is that you never go back.

Principle #3 – Mortgage Fundamentals

Your home is both your largest asset and your biggest liability. If you make the right choices, your home will be both a source of pride and financial freedom.

Your home has traditionally increased in value over the years. And your mortgage that you used to purchase your home is a liability. Taking the time to understand this liability is a major step in avoiding the pitfalls that will rob your savings and erode your financial foundation.

When you understand how your mortgage really works, you can structure things to ultimately save thousands of dollars over time and gain an upper hand on becoming financially successful.

Principle #4 – Emergency Funds

Protect yourself – job loss, injury, natural disaster, theft. Unwelcome events may not be only physically and emotionally challenging, but financially devastating. Prepare for the worst.

Emergencies are a major contributor to financial stress, debt, and frustration. They are what life is made of, yet we are surprised when they hit. With a proper emergency fund, families have more confidence and security.

Most household have less than one month of expenses in reserves. This not only creates a possible financial disaster, it prohibits them from being able to participate in strategies that would lower costs in other financial areas.

Maintaining 3 – 6 months of expenses allows you to live not only financially fuller lives, but actual emergencies are much less of a financial burden.

Building up your emergency fund is not easy, but it’s critical in building a strong financial base.

Principle #5 – The P&C Factor

Most households pay 20-30% more than they need for auto and home insurance. Why? Because everyone needs it, but few know how to shop for it.

Additionally, most people do not understand P&C insurance and they misuse it causing a lifetime of higher premiums and incorrect coverage.

Insurance is all about risks. What risks are you willing to shoulder and what risks should your make sure your insurance covers? When you learn how to play the insurance risk game, not only do you become a savvy consumer, but you can leave more money in your pocket. Then you can use the extra money to pay down debt, increase your emergency fund, etc.

Principle #6 – Protect Family Income from Death

Life insurance is a confusing and emotional topic for many. The purpose for any kind of insurance is to help protect you from financial loss. Insurance is here to help you manage the risk against the possibility of something happening that could wipe out you and your family financially.

What’s the possibility of death? 100%… Death will ultimately visit EVERYONE. It’s one of the few types of insurance that you will have pay off for you and your family.

Principle #7 – Pay Yourself First

Are you paying everyone else before you pay yourself? How much is left after the bills have been paid? Not much!

Money is often a major cause of family problems and divorce. When families do not share a common financial vision, they struggle and become stressed… losing sight of their financial goals.

Paying yourself first will help you take control of your financial future. This will allow you to pay down debt quicker, build your emergency fund faster, and get you that much closer to your future financial goals.

BONUS Principles

  • Spend less than you earn
  • Pay off credit cards every month – no exception!
  • Automate your savings / investment contributions
  • Max 401(k) employer match
    • Take advantage of Roth 401(k), if available
  • Max Roth IRA or similar tax-advantaged vehicles
  • Pay attention to fees

Bottom Line

The world of money is confusing with too many questions and too many opinions. Nobody will care about your money as much as you do… that’s why you absolutely must learn everything you can about your money.

Continue learning how to make your money work as hard for you, as you do for your money.

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