By ROBERT K. CUNNINGHAM, Personal Finance Coach/Consultant
RIGHT OUT OF THE GATE: This blog/website and all its content is designed and produced for information purposes only. No representation is made to guarantee the accuracy of any of the content contained on this website, nor should it be interpreted that specific investment recommendations are being made. The reader assumes any and all risk for strategies which are acted on.
Last week, I introduced to you the revised focus of this website… which consists of a personal financial gameplan centered on Dividend-Paying Whole Life Insurance (DPWLI).
Now it’s time to lay out how I will detail this information, which will be formatted as six posts, explaining in specifics how to go about each of the six steps to achieve six figures of net worth. I’d love to be able to announce that you can accomplish this six times faster than with traditional strategies, but there are two reasons that would be a false claim.
For one, the notion of six times faster than about 42 years — the timeframe from age 23 to 65 that many adults spend as income-earning professionals — would mean that I can get you to $100,000 in seven years. Some might achieve that milestone in such short order, of course, but there’s no way I would propose to assist the masses in doing so. Sorry, but this is about keeping it real.
Secondly, it would imply that “normal” or accepted methods of saving and investing typically buoy people to six figures. I’m not sure that’s so, thus any claim related to that, including a comparison, would be moot.
Are ya with me so far?
I mentioned six advantages in the headline of this post. In fact, there are more than six, but in the interest of being consistent the half-dozen are: safety, liquidity, rate of return, tax-advantaged, living benefits, and a death benefit.
OK, without further adieu (and that’s as French as I get), here are the six steps with a brief explanation of each:
1) Summarize all your income and expenses. Yeah, I know… this sounds painful, and boring as hell. But it’s a must if you’re going to do this correctly. Whether you do it on a computer, or you sit down with a pen and a legal-sized yellow pad, you need to be willing to account for all your net income (take-home pay, income from rent or other sources) and your monthly payments to others.
The idea behind doing this is two-fold: A) Determining how much income, if any, that you have monthly to dedicate to saving/investing, and B) Form strategies on effectively cutting your current spending in order to increase A.
2) Establish a budget. The dreaded ‘B’ word. Let me make something clear from the get-go. There are certain financial authors (should I cite any specific examples, David Bach?), who will claim you can engage in savvy personal finance without a budget. I’m not entirely sure what is meant by that — and I’ve read The Automatic Millionaire twice (it’s mostly a very good read) — but any strategy that doesn’t decipher income vs. expenses is either ill-advised or is wasteful of available resources, or both.
The need to be overly specific can be debated, but you have to not only know where your money is going and coming from, but also be willing to adjust based on those numbers for your own long-term benefit.
3) Begin ‘Paying Yourself First.’ This simply means that you dedicate x amount of money per month to saving/investing BEFORE you start paying bills and everyday expenses. It’s the one piece of personal finance advice that, I believe, is universal.
In other words, EVERY so-called guru, expert, author, blogger, and wanna-be seems to agree on this principle. So should you.
4) Eliminate all unsecured debt. You can never truly start the journey toward six figures of net worth until you eradicate your debt. Home mortgage debt and, in some instances, a car loan and school debt are acceptable, depending on the terms and circumstances.
Credit card debt, however, is only OK if you pay your balances in full each month, and so that is managed under expenses. If you carry a balance, even just a few hundred dollars, a top priority for you is to pay it off as fast as possible. Because if you don’t, you’re wasting money on the astronomically high interest rates. And even if you’re taking advantage of a low (0%?) promotional APR, it’s temporary and still interferes with saving and investing. It limits your ability to EARN interest rather than pay it.
5) Open a DPWLI policy. A plethora of benefits, living as well as the other kind, and advantages over conventional strategies await you.
6) Borrow against your accrued cash value to buy a home. Personal finance, like a typical college’s curriculum, has several stages… from introductory to intermediate to advanced. Buying your first home often represents the culmination of a successful completion of fundamental financial principles.
And soon, you might be able to tap your resources for a car purchase… eventually, it will make sense for you to do so as you learn to take full advantage of the features of your DPWLI policy. But we’ll get into that soon enough.
Meanwhile, in next week’s post we will break down Step 1 — exactly how to go about determining your income and expenses, and begin the process for using that information.
Until then, as always, thank you for reading.
For more specific information on DPWLI and related strategies, please go to www.spwealthadvisors.com, and let them know by any communication you choose to commence that you were referred to that site via www.buildwealthearly.com.
DISCLOSURE: If you decide to purchase a product(s) from spwealthadvisors.com, I will qualify for an affiliate commission.