Bill’s Blog | January 14, 2022
The road I refer to takes you on a lifetime journey and has no shortcuts. So sorry, I am not providing the winning lotto ticket numbers or the hottest stock or crypto tip. True wealth and financial freedom takes a lifetime of learning, discipline and making more good financial decisions than bad.
Unfortunately, I have made numerous poor financial decisions over my near sixty years on this planet. Mainly due to a lack of sound financial knowledge. But thankfully, I have also made many good decisions, learned from my mistakes and found wise mentors to learn from their expertise. One key lesson I learned was not to beat myself up over poor financial decisions. First, we all make many bad financial decisions on our journey, which is just part of being human. Second, stop repeating dumb mistakes and break bad money habits from your life. Finally, I often say to friends, “throw PERFECT under the bus, as it does not exist on this side of eternity.” So, today I will share three simple principles from my Wealth Foundation Series course that will help you get on the road to financial freedom in 2022.
Lesson One: You can not spend more money each month than you take in. That sounds simple, but it is one of the more difficult disciplines for many people to grasp and live out. I will go as far as to say if you cannot get your spending under control, you will never experience financial freedom! So, if this is so important, what must I do to correct this fatal error?
- Start tracking 100% of your monthly spending (for two months) and evaluate where all your money is going each month. Doing this can be quite a revelatory experience. It tells you a lot about yourself and what you value in life. To be clear, I am not against spending, but there needs to be limits and priorities set in each of our lives if we want absolute financial freedom.
- Once you take an honest look at your spending habits, you need to remove all unnecessary and frivolous expenditures. Simply put, you need to have excess money each month dedicated to multiple savings accounts and an investment account or two. I go more into this in my course if you want to learn the entire strategy.
Lesson Two: Next, we need to create a basic budget. Nothing complicated. There are lots of free budget tools or spreadsheets. If you cannot find a simple one, please reach out to me, and I will send you the budget spreadsheet I use and the one I send to my clients (for free).
- A budget needs to have fixed expenses recorded (housing, transport, food, clothing, insurances, etc.) and optional spending. Two critical insights: many people get into trouble over optional spending. Meaning they spend $1000 a month on going out. We all like to go out occasionally, but keep it moderate and a treat, not an entitlement, especially with raging inflation (it has become very costly eating or going out!).
- Second, regularly look for ways to negotiate and reduce expenses with carriers, insurers, services, etc. Yes, this takes some work, but it can save you thousands a year in unnecessary costs to your budget. I do this annually with business and personal expenses, and it has saved me thousands of dollars over the years.
Lesson Three: Get out of all BAD DEBT and stay out of debt unless it is a well-thought-out good investment or business debt. Even good debt takes real skill and a clear plan. For most people, debt is a trap and robs them of financial freedom.
- Develop a debt elimination plan and seek professional guidance if necessary. Creating wealth is a team sport, and we all need differently gifted and integral people to help us on the wealth journey. In many cases, this will require drastically reducing your monthly spending. It could also include selling items you own and doing lump sums against your higher-interest debt obligations. Focus on floating rate debt (LOC & Credit Cards) first, as when interest rates start going up, these debts can put a noose around your financial well-being.
- If it took several years or several terrible financial decisions to create a debt mountain, please be realistic and don’t expect to be debt-free in a month or even a year. Instead, develop a reasonable plan and work your plan until the debt mountain is gone.
- Commit yourself NEVER to pay interest to a credit card company. I am not against using credit wisely; make sure your expenditures are part of your monthly budget and paid off in full. Recently, I saw that only about 50% of people do this, and I am one of them, and I encourage you to do the same.
- I explain the difference between good debt and bad debt in my course. Understanding the difference and the real risk of even good debt is critical. Many business people and skilled investors have gone belly-up, taking on too much debt at the wrong time or not evaluating the risks properly.
The road to financial freedom is not easy, and you may have noticed I did not mention a number as that will vary from person to person based on skill-set, knowledge and drive. However, if you commit in 2022 to spend less than you earn, develop a simple budget, negotiate or eliminate unnecessary costs and rid yourself of debt, you will do very well. So please let me know if I can serve you sometime this year. Thank you
All the best in 2022,
Bill Westmacott, Owner