Good morning! Welcome to the fifth and final installment of Getting Unstuck - Reigniting Your Life. So far we've covered what getting "unstuck" means, why we get "stuck", how we get "stuck" in relationships, how to get "unstuck" at work, and today we'll finish off with why we get "stuck" financially and what to do about it. OK, this is a big topic so let's get started.
A study I read a couple of years ago said that if you took all the money in the world and divided it equally among the 7 billion people in the world, in just 3 years time the same people would once again have all the money. How could this be you ask? Because people that are wealthy do very specific things with their money, and people who aren't wealthy, also do very specific things with their money.
It has nothing to do with how much money you make, but everything to do with your plan. Don't have a plan? Don't worry, we'll get to that. Another study I read recently said that in North America at the age of 65, 1% of the population is wealthy, 4% are financially independent, 5% are still working, 36% are dead, and 54% are dead broke. In one of the richest societies in the world! How could this possibly happen? Because most of us don't have a plan!
You see, the poor and middle class work for money, and the wealthy have money work for them. Anyone can become wealthy if they follow a sound, long-term plan. The challenge is that instant gratification is killing our dreams. Here's most people's financial plan:
Work - Save a little,
Work - Save a little,
Work - Save a little,
Spend! Spend! Spend! Stuckness, Stuckness, Stuckness!
We save some money, but it doesn't take long and we spend it on a want! We want something NOW, so we buy it. Instant gratification.
To help you get "Unstuck," I've put together a 5 step financial plan that has worked for me.
Step 1 - Set up your accounts. If you are an employee your going to need five accounts with your financial institution. Yes, I said 5. They are as follows:
Personal operating account - money to run your life
Charity account - giving starts the receiving process
Security account - No risk, low return investment
Growth account - Higher risk, higher return account
Fun account - Vacations, 2nd cars, what ever you want!
Step 2 - Divide your income. This step is crucial to your success and the amounts can vary, but you must always put something into each account every payday. I would suggest splitting it up this way to start:
Personal account - 80% of your pay
Charity account - 5%
Security account - 5%
Growth account - 5%
Fun account - 5%
So if you had an annual income of $50,000.00 ($4,167.00 monthly) you would put 80% or $40,000 annually ($3,334 monthly) into your personal account. This leaves you with $10,000 to split evenly between the four other accounts, which is $2,500.00 each annually ($208.34 monthly) into Charity, Security, Growth and Fun.
Now before you get all up tight and say, "I can't live on that!," remember that these amounts are all flexible. You can always change your amounts to 90% into Personal, 2.5% in the other accounts, or even just 1% in the other accounts and 94% into your Personal account. You decide, but the key here is that you always put SOME money away. It has to become a habit. If your not disciplined enough, have this set up automatically at your financial institution.
Step 3 - Redistribute your profit. Now here's the beauty of this system! Quarterly, bi-yearly, or yearly, you decide, take the money you made in your growth account, and divide it equally into your Security and Fun accounts. So if you made $1000.00 profit, put $500.00 in Security and $500.00 into Fun!
Step 4 - Measure monthly profit and losses. Review a personal profit and loss statement and net worth statement monthly. I know this one's hard, because most of us don't really want to know this info, but what can be measured, can be improved. If you don't know where you stand how can you make good decisions.
Step 5 - Educate yourself. Take the time to study what you are investing in. "That's what the financial adviser is for," you say. And you'd be right, but I tend to only invest in what I understand. If you want to invest in stocks, learn about the stock market. If you want to invest in Real Estate, learn about Real Estate. Simple as that.
This is a simple system that anyone can follow. If you're self-employed or a business person, you may want to add two more accounts. A Professional account with money to run your business, and an Income Tax account to pay "the man." That gives you a total of seven (7) accounts. Split up the funds as you see fit, but never spend your personal money on your business, and vice versa.
Needless to say that you should always, and I highly recommend that you do, seek out good financial, insurance, and tax advice when setting up a system like this.
Well that sums up the system to help you get "unstuck" financially and remember, it's not a get rich quick deal. Be patient; wealth is like a tree, it grows from a small seed.
If you've read this far, congratulations! You're on your way to getting your life "unstuck."
You've been listening to the Soul Mechanic, and as always, it's been my pleasure to serve you. Sending you Love, Happiness, and Abundance.
Take care, and see you again soon!
* Legal Stuff: This 5 Step financial plan has worked for the author, but no guarantee is made or implied that you will see the same, or any results at all.