S.A.V.E. for Financial Success

I created the acronym S.A.V.E. as an easy way to remember some simple steps to create financial success.

Simplify: Life is so complicated these days that most people don’t know if they are coming or going. I once heard that if the devil doesn’t make you bad, he makes you busy. This busyness of life creates an unfocused and disorganized life. The reason why a lot of people don’t achieve more success is because they have reached what Dan Sullivan calls - a ceiling of complexity. To break through the financial ceiling you need to gather and organize all your financial documents so you can see if what you are currently doing is working for you. Do you have more than one checking or savings account open? Do you need all those credit cards? Can you consolidate some of your investment accounts? Do you have all your financial information at your fingertips?

Automate: A lot of people left on their own can’t save a dime. Most people are also emotional investors. So to overcome our human tendency to overspend, you need to automate your savings for your financial goals. This means that you should have your employer directly deposit some of your earnings from your paycheck into your retirement plan. You should also have your bank automatically take a specific sum of money each month from your checking account and directly deposit it into your savings account. It’s the only way I know how to save that works 100% of the time.

Variety: You have heard that you should never put all your eggs in one basket. This is just common sense when it comes to investing. This wasn’t so common for all the employees at Enron who invested all their 401k money in their company stock account. Variety is diversification plain and simple. Diversification requires investing in different types of asset classes, like cash, fixed income, and equity investments. If you need professional help, hire a Fee-Only Registered Investment Advisor to guide you through the investment diversification process.

Education: Unfortunately most Americans are financially illiterate. You need to make a commitment to learn about financial success. The best way to learn is to read. . There are a lot of great financial books, magazines, newspapers, and websites with great consumer friendly information. Avoid anything that smells like get rich quick books, television shows, or seminars. Make some time daily to read and invest in yourself!

Remember the 4 simple S.A.V.E. steps to guide you to Financial Success.

Nobody Is Going To Do It for You

In my life I have come to the conclusion of absolutely knowing just a few things for sure. One of those things is that you just can’t make anyone do anything they don’t want to do. Even if they tell you that they want to do it. I hear so many people say that they want to become wealthy but rarely are they ever willing to do the work that comes with becoming wealthy.

I have found that the difference for some people on My Street is understanding the difference between motivation and inspiration. Motivation is temporary external pressure that you feel. An example would be when a boss tells you that you need to do something or you will be fired. Inspiration is a more permanent and intense form of personal pressure. You take on a project at work because you really want to and you want to show everyone how good you really can be. Most people are self-deceived in believing that they are inspired when in reality they are just motivated for a short time. That is why I am not a big fan of motivational speakers. I have learned throughout the years that motivational speakers are excellent at manipulating your emotions to get you to quickly buy their products which eventually end up collecting dust on your shelf somewhere. Becoming wealthy requires applied knowledge, persistency, and time. You are going to have to fight your inner demons and find the courage, self-determination, and faith to do whatever it takes (as long as “whatever it takes” falls within your own moral compass).

Here are few other principles that if applied can change the direction of your life:

My Street Money Principle 1: Wealthy people make the time to focus on their core strengths and delegate or manage their weaknesses. The problem is that very few people ever take the time to reflect about what unique capabilities they can use to bring value to themselves and the people around them.

My Street Money Principle 2: Don’t just think about your goals, write them down. Academic studies have proven that people who write down their goals have a higher percentage of achieving them than those who don’t. Most people on My Street blame being too busy to do this. Don’t be too busy to create the life of your dreams!

My Street Money Principle 3: Create a circle a support. A circle of support is a list of people in your life that want you to succeed. They are the people who help you express your full potential. They can be your spouse, parents, your baby sitter, your accountant, attorney, etc. You can go to my website www.louisbarajas.com to download a free Circle of Support form that I use with the people on My Street.

The problem isn’t knowing these principles, the problem is applying these principles to reach your preferred future. Remember, nobody is going to do it for you.

Should I Invest Right Now-Right Now, or Later-Later?

George Lopez says that when we asks his Latino friends if they want to do some activity with him, like play golf, they respond by saying - do you want to do it right now-right now or later-later? I ask you a similar question, should you invest right now-right now, or later-later? Let me help you if you have no idea on how to answer this question.

The reason to invest right now is based on the concept of compounding. Mark Twain once said that compounding is the 8th wonder of the world. What is compounding? Compounding is the concept of growing your money geometrically not arithmetically. Did I lose you already? Hang in there. Would you prefer to have a $100,000 dollars today or 1 dollar doubled every day for 20 days (one dollar today, two dollars tomorrow, four dollars the next day, etc.)? Does this sound like a trick question? One dollar doubled every day for just 20 days turns out to be over a million dollars. This is the power of compounding.

Compounding also tells us that the sooner we begin saving, the less money we will have to put away in the future. For example if you are 24 years old and invest $3,000 a year for only 10 years at an 8% interest rate by the time you are 65 years old you will have $550,897 (having invested $30,000). If you wait until you are 34, you will have to invest $3,000 a year for almost 35 years (having invested $105,000) just to have the same amount of money.

These examples should convince you that you need to start investing today. Don’t be like the typical old person who tells me, “I can’t believe I am 60 years old and I don’t have any money. I should have started when I was young. If I had only met you years ago…”

If I have convinced you to start investing - what is your first step? Start with your retirement plan at work. Have your company withhold at least 10% of your salary from your paycheck and have it directly deposited into your 401k plan. If you don’t have a pension plan at work, you could open up an Individual Retirement Arrangement (IRA) at a bank or online with a no-load investment company. You can have money withdrawn from your checking account and directly deposited into your IRA on a monthly basis. Another great way to get started is to invest in mutual funds. Seek professional advice before investing in anything you don't understand.

By the way, George Lopez, if you are reading this, I have sent you a couple copies of my book asking you for a testimonial. Can you send it to me right now-right now, not later-later?