The first step to achieving any goal is having the right mindset. If you believe financial independence isn’t possible, STOP! This post isn’t for you.
For anyone who believes they can achieve financial independence, even though they don’t know where to begin, then I’m writing this for you!
The habits, behaviors, and routines that we develop are good predictors of our success. When it comes to your finances, it’s no different. To succeed financially, you need a system, a routine, a set of behaviors that enable your success.
The system I have used for years, which has worked very well, consists of just two behaviors. It’s relatively effortless and I am able to do it consistently, regardless of what else changes.
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[icon type=”fa-fire” color=”#f29b0f” size=”20px” style=”plain” link=”” new_window=”true” ] Behavior One: Train your brain to ignore how much you really make
I have never had access to my full paycheck (truth be told, neither have you, since taxes come out first).
My retirement contributions are automatically deducted from my paycheck, and any additional non-retirement savings is directly deposited into a designated savings account before I ever get to see any of that money.
This simple act trains my brain to think of my take-home pay , which is the amount left over after deducting money for taxes, retirement planning and savings, as the only available money for spending.
[icon type=”fa-list” color=”#32c739″ size=”20px” style=”plain” link=”” new_window=”true” ] Action: Deduct money for retirement planning and savings directly from your paycheck, so you never see it or spend it.
[icon type=”fa-fire” color=”#f29b0f” size=”20px” style=”plain” link=”” new_window=”true” ] Behavior Two: Practise financial segregation
I physically segregate my money. It isn’t enough to just allocate money for certain activities. You must take the extra step to also physically separate the money you allocate.
The simplest way to do this is to open different accounts. At a minimum, you need these accounts:
An account strictly for paying recurring bills. These bills are predictable (even when they don’t occur monthly), and you know exactly how much you need to set aside
An account for financial goals, such as paying down debt or a down payment for a home
An account for discretionary, “fun” spending. Determine how much money you will spend for going out, entertainment, etc. and deposit that amount into an account. It eliminates the danger of overspending
In addition to the accounts above, I also have these accounts:
An account for groceries and household items
A home maintenance account
An account for charitable contributions
With segregated accounts, I avoid robbing Peter to pay Paul, and I automatically stay on track with my financial goals.
[icon type=”fa-list” color=”#32c739″ size=”20px” style=”plain” link=”” new_window=”true” ] Action: determine the appropriate allocation for your money and practice segregation by opening separate accounts.
Financial independence is possible. Keep striving for it. [icon type=”fa-heart-o” color=”#f5141b” size=”22px” style=”plain” link=”” new_window=”true” ]
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