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Simplifying Financial Success for a Fiscal Investor

Sprouts growing with education and discipline

Fiscal Investor- Simplifying Financial Success!

Being a Fiscal Investor is knowing how to be financially literate and make sound intelligent decisions and goals with your money, learning how to invest it, and knowing how to keep it.    Financial literacy is all the rage now but most people who have accumulated wealth know the value of their money.  Making and growing wealth is not a given, it takes work, discipline, education, and utilizing the tools to grow your money.   The goal of becoming a Fiscal Investor is to understand the value of your money, be fiscally smart, and invest it as your accumulate it. 

How do you become a Fiscal Investor?  Follow the 6 principles in the article below.  However simply budget, focus on spending, savings and investing, and discipline.  Live by the 50-30-20 rule.   This is easy in theory.  50% of income goes to needs which means cars, house, food, insurance, etc.  30% on wants.  20% on savings.  We will get back to these soon. 

1.  Earn– This is easy.  You need to have a source of Income.  If you get money, what do you do with it? 

2. Budgeting- Create an income statement and balance sheet– You need a budget!  Like a business, this is your income statement and balance sheet of your life.   Where is your money going?  You should know this for this month and in the future.  What are you spending your money on?  This is easy if you have discipline.  Do you really need 7 TV in the house on cable especially if you never watch a few of them. What is your game plan! Budget and Balance Sheet templates!

Every coach in professional sports has a game plan before the start of a game.  The good ones are educated and planned but if things go differently, they adapt and make modifications.   However, you need to know your game plan first.   One simple question you should always have- What will this do to my budget.  What will it do to my bottom line (last line in an income statement for a business-  hence the statement tell me the “bottom line”!   Income-Expenses= Profit/Losses

Secondly, you should know your net worth.  Your net worth is calculated by your balance sheet.  Simply fact of life, like it or not, your net worth is how much you are worth.  If it is positive congrats!  If negative, now it is time to get busy and improve it.  Budget and Balance Sheet templates!

Thoughts on creating a budget and … Follow SMART principles. 

3. Debt/Credit Management and Interest Rates– if you are paying it, this is a must review category.  You don’t want to be paying interest on borrowed money if possible.  You don’t want to be paying a high rate.   A 15-20% rate on a credit card, car payment, etc, you are throwing money out the window.  There are good interest rates, but you need to be very careful.  

Good interest rates are low rates on big purchases such as houses or cars but not 10%+.  These large purchases require more capital, and most people don’t have it.  And if you could buy a house with cash, you should be able to get more than 3% in an investment if that is your mortgage rate.  Pay off high interest rate loans or refinance them!  Paying too high of interest will be very difficult to become a Fiscal Investor!

Know your credit score!  In the Financial Plan,  I said look at recurring fees so be careful but is a good one to get to review.  There are also many free ones. 

4. Invest and Save– You need to learn to save as much as you can.  Pay yourself first.  Every month, you should be saving.  Check the guide to Long-Term Investing!  The site has many ideas on investing but talking to a financial advisor is a good idea.  Know your risk tolerance.  Buying a risky asset is not a good idea until you can afford to lose it.  A rule of thumb is the more risk, the more reward.  MORE risk means you probably will lose it but not a given.  Education is key.   We would suggest you start with better plans like IRAs, 401ks, savings accounts, index funds etc.   Once you have an emergency fund and retirement funds, you could get more aggressive.   The rule of thumb with your paycheck is 20% (401k, emergency funds, other investments).  Check out the Investing Section!

5. Protect– Any thing that takes your money is a risk to becoming a Fiscal Investor.  Your goal should be protecting your money.  Check your credit, get insurance, etc.  You don’t need to lose your hard in money.

6. Set SMART Financial goals– Set goals on what you what to achieve!  Be realistic, you probably aren’t going to buy a yacht or private plane.   Review, review, review.  This requires education.   You will probably make more money in an index fund than a savings account over the years.  Educate yourself.  For example, an S&P index fund is probably more diversified and safer than an OIL index fund. Read more about the SMART concept.

Here are some basic ideas to live by daily.

  1. Know Your Take-Home (Net) Pay – Before committing to significant expenditures, review your budget after your monthly expenses.
  2. Budget– Create an annual budget to identify expected income and expenses. Including savings. This is your guide to live within your income. Budget and Balance Sheet templates!
  3. Pay Yourself First – Pay yourself monthly.  It should be an amount each month for long-range goals and unexpected emergencies.
  4. Don’t Borrow if You Can’t Pay – Be responsible.  Each time you can’t pay a creditor, you hurt your credit score.  High credit scores raise the interest rates you will pay in the future.
  5. Compare Interest Rates – Don’t pay too much for borrowed money. You should never pay 15%+ for a car or anything!  15% probably is way too high also!  Especially for a dinner or vacation that will take you a year or longer to pay off!  If you go to dinner for $200 and don’t pay it off for a year, you pay $30 in interest.  NOT a good Fiscal investor and I bet you might not even remember the dinner! 
  6. Your Credit Past Will Be Your Future Interest Costs and Borrowing Ability– Be aware that credit bureaus maintain credit reports. Negative information will affect your ability to borrow in the future.
  7. SAVE and INVEST – The amount you make on savings is based on the time-period over which you save and invest. See the Eighth Wonder of the World!
  8. Money Doubles By “The Rule of 72″ – Use the rule of 72 to know how long it will take to double your money.  Your interest divided 72. For example, an account earning 5% interest will double in 14.4 years (72 divided by 5 equals 14.4).
  9. High Returns, High Risks – Think Crypto- There were many people that made a ton of money when it ran from $10,000 to $100,000, but others got hurt when it dropped from $100,000 to $20,000.
  10. Don’t Expect Something for Nothing – Nothing is free, if it is too good to be true it is almost always the case.
  11. Keep your insurance– Purchase insurance to avoid being wiped out by a financial loss, such as an illness or accident. An insurance plan should be part of every personal financial plan.
  12. Set SMART Financial Goals – Take time to list your financial goals, with a specific time deadline and dollar cost, and develop a realistic plan for achieving them. Educate! Educate and have dispone.