Financial summit 7 steps

Have you ever heard the term financial self-medication?

All doctors have told us more than a thousand times how dangerous self-medication can be and that usually people go to the doctor when they feel very bad, and the answers are always the same: “Doctor, I felt bad, but I thought that with this pill I was going to get rid of it».

Imagine the same thing, but with your finances, many people feel that since money is a tool they use every day that makes them specialists in the subject, so hiring a financial advisor and planner does not make much sense to them. or is it something that only those who have big money problems use (either because they are full of debts or rather because they have money and do not want to lose it).

For this reason we want to briefly share with you a methodology that we use with our clients, and if you are going to self-medicate financially, at least have a guide on the steps you must follow to achieve your Financial Well-being.

7 steps to your Financial Top:

Before you start, there is no way to start improving your personal finances if you don’t meet the basics of everything:

Your expenses must be less than your income

Once this base is fulfilled, we can move on to the following steps:

1. Savings equal to 1 month of your monthly spending:
   When we talk about personal finances, the great factor will always be having the ability to protect yourself financially and that small unexpected expenses do not bankrupt you, the best way to start is by calculating how much you spend on average each month and this will be your first goal of saving. We suggest that you keep this money in a bank account other than the one you use on a day-to-day basis for your expenses, that way you will feel that it is not there for the usual expenses but only for unforeseen situations.

2. Eliminate card debt:
   We see with fear how once again after the start of the pandemic, the levels of debt on credit cards are rising, which tells us that there are many people paying with credit cards for things that they cannot pay with their income and it is very They are likely spending more than they earn. As seen in the famous Netflix series The Squid Game – Squid Game, those who get into debt do not end well, it is a game that many lose and in this case there is no secret reward that you will receive if you spend more with your cards, don’t be fooled by points or miles programs.

3. Emergency fund:
   As you can see, the idea is to go up each time to a new station of security and financial well-being, your next step should be to have at least the equivalent of 3 to 6 months of your spending saved in the bank (if you live in the USA) , if you live in Latin America we suggest that this amount be a minimum of 12 months. The main emergency that you should think about how to cover would be: Do I have enough savings to sustain myself financially if I lost my source of income? And if you think you have it, the second test is, Will these savings be enough for me until you find a job like the what did you have?

4. Health and life insurance:
   I believe that all the families on the planet have suffered the unfortunate loss of a family member or a friend with the pandemic, confirming that famous advertising phrase of a Venezuelan insurance company that said “It is better to have it and not need it, than to need it and not have it” . The costs of any issue related to health are extremely important, and can quickly break family finances, so it is essential to have this protection. In the same way, if your family depends financially on you, having a life policy for their protection is essential, but we always suggest using policies called Term or Term Life by their name in English and not those that combine savings with insurance.

5. Invest:
   If this period teaches us anything, it is that inflation is present and eats the money you have in your bank accounts. That is why after having your emergency fund you must start investing. Many people say that they are afraid to invest because their balance can go down, but they do not realize that in the bank money is losing its purchasing power every day, but what happens is that the balance looks the same but when you go out to buy you will notice that you will not be able to acquire the same as a year or ten years ago. In the stock market at least money has the possibility of going up and down and not just going down as it happens in your bank account. Remember if you invest little by little with automatic monthly contributions, it is one of the best ways to achieve that financial independence that you so desire and have your money working for you even when you are sleeping.

6. Pay off the mortgage:
   If you live in the United States, it is very likely that you have a mortgage for many years and normally financial advisors would recommend that if the interest rates are as low as the current ones, it would not be necessary to pay it, but since we are already approaching the top of your financial goals and if you are no longer so young, it is very likely that you will have to start selling your investments to maintain your expenses and pay your mortgage, because you may already be retired. But these investment sales can have a fiscal impact and it is better to reach the top without any debt.

7. The achievement of your financial goals:
   This is the moment of financial nirvana, where you see that you have achieved your goals of accumulating the necessary money to live an independent retirement or retirement, being able to maintain or improve your quality of life, in the same way you will surely have been able to save for the education of your children and it is where we begin to fight for those other goals that you want to achieve: such as leaving a legacy to your relative or supporting charitable foundations, the second home or the boat that you always wanted.

As you can see, it is not a recipe that is applied in one opportunity, but rather it is like a route to the top of a mountain where you will surely have challenges and setbacks along the way, but if you are clear about what you want: to reach your financial peak and you know how to get there, nothing can stop you.

Of course there are many people who try to achieve it alone and many others who rather decide that a financial advisor and planner can serve as a coach to guide you along your financial path, preventing you from making financial mistakes that can have high costs.

Alonso Rodríguez Segarra

Founder & CEO Advise Financial

advise-financial.com

Alonso is a “CERTIFIED FINANCIAL PLANNER™” who is dedicated to increasing the Financial Well-being of nurses, physicians and successful immigrants in Florida and Texas. With more than 20 years of experience in the world of finance, always working for the best interest of his clients, under fiduciary criteria.