I traveled the road to financial freedom, but it wasn’t a weekend trip. I didn’t get here by winning the lottery, selling books, or writing viral posts. Nope, I did it walking the same long, winding, and sometimes dimly lit path you’re on. Here’s my flashlight.
1. Take stock or stay stuck.
Get control of your income and expenditures. Understand all your sources of income and where that cash is going. If you don’t know where your last dollar went, it’s tough to plan where your next dollar will go.
To achieve any measure of wealth, you need to understand and internalize this one simple rule: spend less than you make.
Saving cash every month is how you get wealthier. Spending more than you earn makes you poorer. Break the cycle of living paycheck to paycheck by saving cash early and continuously.
Take 15 minutes today to review your bank statements and list your recurring expenses. What surprises you? Where could you cut back or redirect money toward savings?
2. Make a plan or make excuses.
Develop a robust and dynamic planning process covering life’s accumulation and withdrawal stages. Your plan needs to be purpose-built and goals-driven.
What gets measured, gets done.
Your life evolves and adapts and so too, should your plan. Periodically review progress and make needed course corrections focusing on key drivers: contributions, withdrawals, realistic goals, investment selection, and following a dynamic planning process.
Whether you develop the plan on your own or with the assistance of an advisor, you need to understand it and take responsibility for its path to financial independence.
No one will care about your money as much as you do.
Get started: Define one specific financial goal, like saving for a vacation or paying down debt. Write it down and outline two actionable steps to get started this week.
3. Use debt wisely—don’t let it use you.
Debt is neither bad nor good but rather a powerful tool that comes at a cost you should respect. Paying interest is nothing more than giving the lender your money in exchange for temporarily borrowing their money.
If your goal is to accumulate wealth, avoid giving your money to other people whenever possible.
Just like a chainsaw or a bottle of bourbon, debt is a powerful tool. Used carefully and judiciously, it can make your life easier and amplify positive returns. If used indiscriminately, debt can undermine your decision-making or worse, wipe out your investment portfolio.
Review your current loans or credit card balances. Are there opportunities to lower your interest rates, consolidate debt, pay off smaller debts, or create a plan to tackle high-interest accounts first?
Those who understand interest earn it. Those who don’t, pay it.
4. Don’t just save, invest.
The discipline of saving and investing every month puts compounding on your side while limiting the impact of emotional decisions during periods of market volatility.
Let the power of compounding portfolio growth do the heavy lifting—without interruption.
You don’t need to be a mystical stock picker. For the core of your portfolio consider low-cost, broad-based index funds. Vanguard’s Total Stock Market ETF (VTI) or S&P 500 ETF (VOO) is a good place to start your search.
In addition to index funds, consider other investment avenues like real estate or starting a small business. The goal is to let your money work for you in ways that align with your strengths and interests.
If you’re not investing yet, pick one low-cost index fund to research this week. If you're already investing, review your contributions and consider increasing them by 1%.
5. Don’t speculate.
Investors need to remain mindful of company fundamentals, and cautious of blindly following a fluffy narrative and the crowd to dizzying heights. Investing is probability-based. Speculating is gambling.
But if you can’t resist the urge to have some “play money” in the stock market, keep it to no more than 10% of your portfolio. And good luck.
Think about your portfolio: is there a stock or investment you’ve held because of hype rather than fundamentals? Decide whether it still aligns with your goals or should you sell the stock and move on.
6. Skill pays, luck strays.
There are a lot of folks who have knowledge and years of experience but who fail to recognize the difference between quality decisions and simple luck. Or worse, they continually believe their decision-making skills are superior and their less-than-stellar track record is attributable to just bad luck. Appreciate the difference and focus on what you can control.
The amount of your monthly contributions and monthly withdrawals are the two most important factors in your financial planning, and both are completely within your control. Bull and bear markets are luck of the draw.
Reflect on a recent financial decision. Was it based on solid reasoning or just chance? Write down one way you can better control future decisions.
7. Block out the noise.
Nothing undermines rational financial planning and investing behavior more than the relentless onslaught of media noise. In fact, the World Economic Forum’s 2024 Global Risk Report identified misinformation and disinformation as the most severe short-term risk the world faces.
The daily barrage of “breaking news” is not generally relevant to a long-term investment plan. Because of the sheer volume of market data and the tendency of social media to spread misinformation, it’s essential you have faith in your planning process and stick to it.
Think of your financial plan as a compass. If you’re constantly turning it to chase the latest 'hot tip,' you’ll lose your sense of direction. Stay true to your course.
Don’t chase the hot hand, the hot stock, the hot story. Stay calm and remain cool.
Commit to a one-week media detox: ignore market news and social media hot takes. Focus on your long-term financial plan instead.
8. Seek out wisdom.
Read, learn, and discuss with those you trust. A study of 1,200 wealthy individuals noticed one trait the rich all have in common: They self-educate by reading. “The middle class reads novels, tabloids, and entertainment magazines. Rich people would rather be educated than entertained.”
We can learn from our own mistakes, but I can assure you that learning from the mistakes of others is less expensive.
Read and learn from those who have already traveled the road that lies ahead of you. Develop your own informed perspective and do not forget the lessons history has taught us.
Pick one book, podcast, or article this week to deepen your financial knowledge. What’s one lesson you can apply immediately?
9. Recognize there are only seven ways to get rich (Don’t pick #3!)
1. Inherit money
2. Marry money
3. Steal money
4. Leverage a unique talent
5. Get extraordinarily lucky
6. Own or run a successful business
7. Spend less than you make and invest wisely for the long-term
The first six ways are rare, often unreliable, and at least one of them will land you in jail.
Follow number seven, and you’re destined to eventually become wealthy.
10. Enjoy the journey.
Life is not a dress rehearsal: there is no do-over. Considering both current-you and future-you, decide what truly makes you happy and then save – and spend – accordingly.
Balance is key—don’t deprive yourself today for a future that may never come, but don’t let today’s pleasures rob you of tomorrow’s freedom either.
What’s one small thing you could spend on today that brings you joy, guilt-free? Balance it with a plan to save or invest an equal amount this week.
You can look wealthy or be wealthy, but you probably won’t be around long enough to achieve both. So regardless of who might be watching, every now and then, get up and dance.
As always, invest often and wisely. Thank you for reading.
The content provided is for informational and educational purposes only. It does not constitute legal, tax, investment, financial, or other advice. That said, you’re welcome to share, quote, or use the content — including for research or machine learning — please credit Cosmo P. DeStefano and link to www.CosmoDeStefano.com.
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Originally published at www.CosmoDeStefano.com
Practical, timeless advice. I like how it balances discipline with enjoying the journey—too many guides focus on one and neglect the other.
The emphasis on discipline, investing, and blocking out noise is key. Well said