Celebrate abundance—financial and otherwise
For me, Thanksgiving is a time to express gratitude for my many blessings and to celebrate abundance. It is also a time to reflect upon the seventh step in the Seven Steps Toward Financial Abundance, “Have Faith in Your Continued Financial Abundance.”
In these times of high unemployment, investment uncertainty, political turmoil and international tensions, it is fair to ask how anyone can have faith in their continued financial abundance. While we have no control over these uncertainties, we can control most of our financial decisions. Let’s consider what we can control as we look at the Seven Steps Toward Financial Abundance.
Step 1 – Spend Less Than You Earn
The first step on the path to financial abundance is save each payday. This may be accomplished by contributing to a company sponsored retirement plan. Another approach is to “pay-yourself-first.” “Pay-yourself-first” means making your first payment each payday to a savings/investment fund. This fund can be used to buy a first house, pay for children’s education, help fund retirement or establish an emergency fund.
Finding a way to save at least 10 percent of after tax income will set you on the path toward financial abundance.
Step 2 – Maximize Your Financial Resources
If you have a company matching retirement plan, contribute at least the maximum amount that will receive a company match. Company matching contributions are “free money,” guaranteeing an immediate investment return on your retirement savings.
When saving for children’s education, Section 529 College Savings Plans reduce your taxes. No taxes are ever paid on the growth and income from these plans when the funds are used for a family member’s college education expenses.
For most people, a high deductible health insurance plan (HDHP) combined with a fully funded Health Savings Account (HSA) provides lower health care costs. Contributed HSA funds are immediately tax deductible (like an IRA) and their growth and income are never taxed (like a Roth IRA) when used for health care expenses. Use all possible strategies to maximize income and growth from financial resources.
Step 3 – Minimize Your Taxes
A spouse with no earned income may be eligible for a “spousal IRA,” allowing for a fully tax deductible annual contribution of $5,000 ($6,000 if spouse is over age 50.)
The American Opportunity Tax Credit provides for a refundable tax credit of up to $2,500 annually, if you are paying for a child’s college education.
Donating appreciated long term stocks for charitable giving provides a charitable deduction on the stock’s full value plus no taxes are due on the stock’s appreciation.
Every dollar saved through tax reductions helps build financial abundance.
Step 4 – Pay Close Attention to Your Investments
Regardless of your approach to investment management, the investment approach implemented should be safe enough for you to sleep soundly at night. If you use an investment advisor, investigate all potential conflicts between the advisor’s method of compensation and your best interests. Remember, you are responsible for your investment success.
Step 5 – Protect Your Financial Resources
Appropriate insurance will protect your financial well being. While the need for health, life and property insurance is often understood, disability and long term care insurance are sometimes overlooked. Without insurance, a serious, long-term disability can destroy even the best financial plan.
Protection from catastrophic financial risks is critical to your financial abundance.
Step 6 -Control of Your Personal Finances
While many financial events are uncontrollable, we can control our spending habits, make the decision to save for our family’s financial future and get dependable financial advice on investments, taxes and risk management. These actions help to maximize financial well-being.
The courage to control what we can provides us with significant power over our personal finances.
Step 7 – Have Faith in Your Continued Financial Abundance
Faith is a defined as belief that is not based on proof. When we implement the first six steps, everything we can control has been done. Having faith in our continued abundance helps diminish fears that can lead to inaction. Faith in continued abundance is an important step on the path toward financial abundance.
Wayne Farlow is the founder of Financial Abundance, LLC, a Registered Investment Advisor, providing fee-only financial planning, asset management and retirement planning services. He is the author of “Financial Abundance Guide,” available free at www.finabguide.com . He can be reached by email at firstname.lastname@example.org or at 303-554-0309.