Financially Fit & FabuIous – Building Independent Wealth

THE freedom that comes with being independently wealthy allows you to make decisions that would benefit you in the future. For many persons, achieving financial independence is an important goal that they would want to pursue. It’s a liberating feeling to know that you can be free to enjoy the benefits that wealth can bring. With a plan and determination, you can become independently wealthy and live life on your terms.

Do you really know what it takes to create sustainable wealth? Let’s look at a few ways you could handle your money and create wealth.

1. Be financially disciplined

Financial discipline helps you to be in control of your income. It is always wise to control how you spend your income, or you will never have enough to be financially free. This can be achieved by avoid spending more than you earn. Failure to adhere to this strategy can result in living paycheque to paycheque, and the possibility exist that you may never make any progress in building wealth.

2. Create a monthly budget

Budgeting allows you to create a spending plan for your income. Following a budget keeps your spending under control and ensures that your savings are on track. It also allows you to keep your eye on the prize ( financial freedom); ensure you do not spend money you do not have; prepare for emergencies and helps shed light on spending habits that are not in line with your goals. This is an important habit to set you on the right path.

3. Set goals

To achieve independent wealth, it requires you to set goals and be consistent. Being unsure or having a vague idea of what you would like to achieve would never work. The vision that you have in mind might not materialize if you don’t put it on paper.

Be specific about what you would like to accomplish and how you are going to get it done. By setting deadlines, being deliberate and taking action can catapult you many years ahead. Staying committed to the process of achieving wealth helps you to stay on track and be consistent.

4. Invest your money

Investing is important for making your money work for you. By investing, you take charge of your financial security. It allows you to generate additional income streams and grow your wealth.  Investments for example stocks, mutual funds and bonds provide income by paying dividends. This is an amount paid to shareholders for holding that particular investment.  Most dividend pays monthly, quarterly or annually, this will enable you to enjoy passive income that could ultimately replace your salary.

5. Create your emergency fund

Have an account to take care of unexpected expenses that may pop up during the month.  This emergency fund ideally should be 3-6 months of your annual income. However, if you are unable to reach this full amount, try to save as much as you can to come close to this figure. This is money that should be easily accessible to cushion you for any unanticipated crisis.

6. Be wise about handling debt

While some debts, such as a small business loan, can help you start a business and build wealth, others for example a credit card with high interest rates can spiral out of control and create more financial harm. Debt can also create dependency for example, when a person’s income increases, they increase their lifestyle and spending. Hence the need to continue to borrow to support that lifestyle.

7. Explore investment options

If you are earning and not investing, it will take decades to become independently wealthy. Explore the options and start by investing in Mutual Funds, local and international equities, local and international bonds and real estate. Ensure that your investment strategy is one that allows your flexibility, convenience and consistency.

8. Calculate your net worth

As you calculate your net worth today, it might be a negative number. However that number should motivate you to grow your wealth. The misconception with most people is that calculating net worth is only for wealthy people. Your net worth is the difference between what you own (assets) and what you owe (liabilities).

Finally, when you make the decision to change your spending habits, you are preparing yourself for a better future. Investing plays a very critical role in your financial life as it helps you to add more value to your current financial status and achieve your ultimate goal of financial wealth. Talk with a licensed Investment Advisor to get started on your journey towards independent wealth.

Latoya Virgo is a licensed Investment Advisor from Scotia Investments Jamaica Limited.