Do you really want to supercharge your finances? No, Washington isn’t granting any stimulus packages, at least to my knowledge they aren’t. But you don’t have to wait on the men and women in DC to approve a stimulus package. You have the ability to supercharge your own finances. Are you ready? Great, here we go!
I suggest that when you construct your monthly budget, you allocate 20% of your income toward investments. This would also apply to funds you receive that weren’t earned (unexpected money). For instance, if someone hands you a $100.00 bill or you find $100.00 in your pocket or tucked away in a book, set aside 20%.
Half of that investment should go to a non-profit organization (i.e. church, local or regional non-profit organization, etc). It is always a good idea to give to those in need or to organizations that do. The remaining 10% should be divided evenly into five funds.
There are five funds that you need to create today:
Fund #1: G.O.O.D. Fund
This is the Get Out Of Debt Fund. You will use this fund to assist in paying down any debt you may have – credit cards, student loan debt, mortgage, etc. Any additional payment on your debt in addition to your regular monthly payments will allow you to reduce and retire the debt faster. That is what we want to do with debt – retire it, eradicate it!
Fund #2: Vacation Fund
The best vacation is a prepaid vacation. Have you ever used your credit card to pay for a vacation? Typically when that happens, you never pay off the debt right away. In fact most families who pay for their vacation via credit cards don’t pay the vacation off until six or eight months after they return. Use the amount saved in this fund, and this fund only, to use for your next vacation. Trust me, this will be the best vacation you have ever experienced.
Fund #3: Retirement Fund
It is important, in my opinion, to invest in a retirement plan outside of your employer sponsored plan. Each time you are paid or receive unexpected money (see above) you should make a deposit into your retirement fund. There are a few vehicles to house your retirement funds. For starters, opening a Roth IRA is a good idea for many people.
Fund #4: Investment Fund
In addition to paying down and saving money, you want to start building wealth. The basic way of doing this is to begin investing. Investing is a vast topic, but please understand when I mention investing, I am not simply isolating investing to stock marketing investing. Investing is much bigger than that. Make sure you download my free e-book entitled Incoming Producing Assets from my site. That book will give you a better idea of what type of assets you can invest in addition to the stock market.
Fund #5: Replacement Savings Fund
There are so many households that are one injury or mishap away from having a major financial issue. Some describe this as living “paycheck to paycheck.” A great way to change that (unless you are waiting to win the lottery, receive a huge lawsuit settlement, or money from a rich relative passing away and leaving you a portion of their riches), is to create a replacement savings fund. This fund should be built up with three goals in place.
The first goal is to save enough cash to cover three months of your regular living expenses (i.e. house payment and other living expenses). The second goal is to save up to cover six months of regular living expenses. The third goal is nine months.
No matter how small the amounts are that you place into these funds, don’t be discouraged—keep depositing. In the words of Vincent Van Gogh, “Great things are done by a series of small things brought together”. Developing these five funds will supercharge your finances because they will retire your debt faster, build wealth faster and build a contingency plan should anything happen to your income.