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Do you live from a sense of financial abundance? Or does a belief in scarcity cause you to live in fear?
I meet many people who do not feel they live in financial abundance, despite the fact that their wealth far exceeds the basic human requirements of food, shelter and clothing.
It's important to move from a fear of financial scarcity to a sense of abundance. This transformation requires a commitment to actively manage, protect and control one's financial activities.
The following seven steps to financial abundance will not guarantee fiscal security, but at a minimum they should help reduce the fear of scarcity.
1. Spend less than you earn
Creating excess earnings is the first step on the path to financial abundance. Excess earnings represent the amount of money remaining when yearly expenses are subtracted from yearly income.
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It is reasonable to save excess earnings of at least 15 percent of after-tax income. To meet this goal, consider the "pay-yourself-first" approach. On payday, make your first payment to the excess earnings fund. This fund can be used to buy a first house, pay for your children's education or help fund retirement.
If you have not already done so,
use some of your excess earnings to build an emergency
fund. This is an account that provides six to
12 months of income when a short-term emergency
occurs. Be sure to keep the money highly liquid
so you can access it quickly.
With an emergency fund, you can weather a job layoff or short-term disability without prematurely using funds from your retirement account.
2. Maximize your financial resources
There are several ways to maximize your savings income and build wealth. For example, if you have a company-sponsored retirement plan, contribute enough money to earn the maximum amount your company will match.
Typically, the company will match a certain percentage of your salary. If the company matches 50 percent of a portion of your overall contribution, the match becomes "free money" that guarantees an immediate 50 percent investment return on part of your retirement savings.
Use Coverdell education savings accounts
or Section 529 college savings plans to save for
your children's educations. Your educational savings
will grow and no taxes will be owed on the earnings
from these plans, so long as the money is used
for eligible education expenses. For more information,
check out Bankrate's article on college
savings plans.
Are you responsible for your own
health insurance coverage? If so, sign up for
a high-deductible health insurance plan that allows
you to open up a health savings account. Funding
an HSA to the maximum amount allowed will virtually
guarantee a lower after-tax health care cost.
To find out more, read Bankrate's article on high-deductible
health plans.
These are only a few of the many strategies that can be used to maximize the income and growth of your financial resources.
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