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3 Baby Steps You Can Take Today to Improve Your Financial Health

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Are you qualified to give advice about financial health?

A few days ago at work my colleague David stopped by my desk to say hi and decompress for a few moments. A few minutes later I was telling him all about the blog the I want to launch. When he asked me about the topic a spontaneous question came up:

Are you qualified to give advice about financial health?

His question twirled in my head for the rest of the day. So that night when I reached home, after washing the day off, all purified and detoxified by a yummy 60 minutes of hot yoga, I wrote this post.

As I pondered over David’s question I realize that this blog is not about giving financial advice.

This blog about sharing my experience. For instance what worked for me and what didn’t work. My intention is that whomever comes across my blog can benefit from my experience in some way or form.

That said, here are the 3 steps that helped me get in better financial shape.

1. Take a honest look at your spending

Know yourself. Understand your needs and wants. You may ask me: “How do I get to know what my needs are distinguish them from my wants?”.

Look back at your day from the moment you woke up to the moment you go to bed and ask yourself:

In all honesty of all that I purchased today, of all the money that I spent, what part of it was really critical, and what part of it could have been saved and invested?

Needs versus Wants

Some questions that may help you identify your wants:

  • Are you overspending for your home, your car, or your entertainment?
  • Do you really need to dine out X times a week?
  • Is it critical for your survival to pay those $90 to see that show?
  • Did you really need to spend so much money on your last trip?

Start observing your spending habits. You’ll be surprised when you become aware of how much of what you are spending is not necessary.

Here’s a video that simply explains the basic difference between needs and wants: let me know what do you think in the comments below!

2. Set achievable financial goals

Why should you set financial goals? Knowing yourself, once again, is key to answer this question.

What are you trying to achieve? Are you saving for retirement? Or to buy a house? Or to pay off debt? Once you have your why, you will find out the what and how: what your goal is and how to get there.

My what is to ensure that I won’t outlive my savings.

If that’s your goal too, read on for my how.

Take action today

“What sustainable action can I start taking today so that 20 years from now I can enjoy my retirement fully for then next 40 years or so?”.

To answer this question, firstly I started talking to friends who work in Finance and have been quite successful already in building their wealth in their 20s. Secondly, I started asking for advice to friends of my family who are successful entrepreneurs who retired in their early 50s.

Lessons learned

Lastly, I started reading books like Think and Grow Rich, Rich Dad Poor Dad, Money Master the Game. This is what I have learned:

  • Small wins lead to big wins. Short term goals motivate you to stay focused on long term goals.
  • Goal setting increases exponentially the chances of you financial success.
  • Leverage the power of compounding. Here’s a video that helped me understand how compounding works.
  • Now imagine that the grain of rice is the dollar that you invest today. See how your $1 invested today will be worth $32,768 in 16 years and $8M in 24 years, assuming that your investment grows at a steady pace of 200%. 200% growth is not realistic but you get the point.
  • Build an emergency fund: Usually 3–6 months of necessary expenses is enough. That means only include your needs and not your wants. You cannot always plan for situations that life throws at you, so having an emergency fund will help get through the hard times.

3. Let a Fiduciary help you manage your finances and achieve your goal

I was making mistakes I wan’t even realizing I was making. And that’s what inspired me to write this post, so that you don’t have to make the same mistakes.

A valuable lesson I have learned by investing in the stock market it that it’s not worth for me to invest in stocks or ETFs. The best financial choice I made in 2019 so far was to get myself a fiduciary at Vanguard and have him manage and allocate my assets.

In just 3 months with Vanguard I have recovered the $20,000 that I had lost in the market due to bad investments last year, and made an extra $10,000 simply by sticking to the financial plan that Vanguard had set for me.

Fiduciary versus Broker

You may wonder: what is a Fiduciary? Is that like a Broker?

Not quite.

Pay close attention here:

Do NOT have a broker manage your assets! Brokers are not paid to act in your best interest.

A Fiduciary is a RIA (Registered Investment Advisors) who, by law, must act in your interest. A Broker is paid commission and acting is his/her own interest, not yours. A Broker manages YOUR money, you take ALL the risk while the Broker enjoys a fat commission if the company they work for wins. Even if you lose.

This video helped me better understand the difference between a Broker and a Fiduciary Fiduciary versus Broker.

What is your experience with spending, setting goals and dealing with Broker and Fiduciaries? Leave a comment below and share your experience: it will help other fellow readers.

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