It’s time to start taking financial responsibility and building your wealth. It doesn’t require an MBA in finance. It simply requires an understanding of the 8 fundamentals steps that will consistently lead you to a more successful and fulfilling life.
Below I will cover these 8 steps in brief. Do the exercises if you really want to learn and understand!
Step 1: Financial Conditioning
Your psychology will always be impacting your decision making process along your wealth building journey. We’ve been conditioned about our money beliefs since we were young. Our beliefs are not our ideas or goals about money, they drive our results.
- Write down what your current money results are now and what results you really want
- Now write the actions that have produced your current results and the actions it would take to get the results you want
- Then write down the words you currently use about money and compare it to the words you would want to use instead. (Your language around money)
- Last, write your thoughts about money in general as they are now and then as you want them to be
Step 2: Financial Baseline
This is critical. It’s a reflection of your past financial awareness. Whatever conditioning has brought you to this very moment in your financial life has created the results.
- Organize all of your financial papers together
- Complete a personal profit and loss statement (Google this if you don’t know how)
- Complete a personal balance sheet (include all assets and liabilities to determine your net worth)
- If you own a business, do the same for it and include a P&L
Step 3: Your Financial Freedom Day
This is the declaration of your vision: where do you want to ultimately end up financially? Be specific.
- How much money (cash flow) do you receive each month?
- What do you want your net worth to be?
- At what age?
- By what day/month/year?
- Do you have plans to achieve this desired wealth?
Step 4: Managing Your Lifestyle Cycle
Managing your lifestyle cycles is where you begin to make choices about your lifestyle. A lifestyle cycle is a cycle of bad debt. It’s a trap.
Bad debt is typically defined as consumer debt or debt that doesn’t allow you to produce any revenue from it (credit cards, “toys”, etc.)
Good debt is debt that is acquired through the purchase of assets that are then invested to produce passive income (mortgage on a rental property, a line of credit strategically done to enhance the growth of your business).
Step 5: The Foundation of Your Wealth Cycles
This is where you structure and automate your wealth plan so your foundation is handled; your kid’s college tuition is taken care of, you have retirement money, your insurance needs are met..
- Clarify the decision of being an active or passive investor
- Choose the appropriate investing strategies
- Develop and commit to money rules
Step 6 – Acceleration of Your Wealth Cycles
This is the step all about learning investing strategies, tax benefits and entity structuring — and applying them.
Step 7: Leadership of Your Wealth Team
No one we know has ever become wealthy doing it alone. They’ve all had a team. And, to enact a team, you need to learn how to communicate, lead and negotiate.
The 5 “Cs” of leadership are:
- Character – the ability to achieve moral excellence
- Capacity – the ability to receive or accommodate
- Credibility – the ability to be believable and trustworthy
- Courage – the ability to conquer your fear or despair
- Communication – the ability to exchange information
Step 8: Creating Sustainable Wealth
There are three essentials to creating a sustainable action plan. These are:
Earners are learners!
Keep yourself educated about your finances and you can reach those dreams of yours!