You’ve chosen a great career field with many opportunities to earn money. But are you using your income wisely? A common thought process is that when you make a substantial salary, you do not need to track your finances as much. In reality, the more you have to work with, the greater the potential is to either waste it or build wealth extremely quickly. If you like the sound of the second option more, here are 10 tips for you to implement.
1. Create And Maintain A Budget
The word “budget” seems to have a negative connotation, which usually makes people think that if you budget, you’re broke. Budgeting actually gives you permission to spend and is a simple way to keep track of your expenses and be aware of how much you’re actually saving each month.
2. Set Up A Debt-Payoff Strategy
Your income is your greatest wealth-building tool, and debt payments prevent you from investing, saving, and enjoying your hard-earned money as much as possible. For those reasons, you want to clear out all credit cards, student loans, and car payments that you may have as quickly as possible. Now that you’ve made a budget, you know how much extra room you have in your budget to throw at debt so you can eliminate money spent on interest.
3. Save An Emergency Fund
Before you aggressively pay off any debt you have, save approximately 3-6 months of your total living expenses. If a family emergency, crisis, or job loss occurs, you won’t be financially stressed because you have money set aside for those unexpected events.
4. Invest Early And Consistently
Take advantage of the time value of money as quickly as possible, especially if your employer offers a 401(k) match! Remember when we talked about your income being your greatest wealth-building tool? Well, the second is time. The rule of 72 means your investment will double when the rate of return multiplied by the number of years it is invested equals 72. (1) For example, if your investments earn 9% per year, your money will double in 8 years. Yes, it is incredible. Invest early and often to maximize time working for you.
5. Track Your Net Worth
Tracking your net worth will help you stay motivated to reach financial goals throughout the years. More importantly, knowing your net worth will help you determine if you are on track for retirement and what needs to change if you are not.
6. Get Term Life Insurance
Obviously, life insurance is something you hope doesn’t get used but is extremely necessary if you have a spouse or children who depend on your income. Fortunately, it is extremely affordable for those who are in good health, so check with a local broker or with your financial advisor about getting approved for 5 to 10 times your annual income in life insurance coverage.
7. Verify Your Break-Even Point For Taxes
Since getting a tax return means you are temporarily loaning the government money, you want to check with your accountant to make sure you are claiming the right number of withholdings on your taxes. That money should be used to either pay down debt, save to your emergency fund, or invest throughout the year. If you consistently owe every year, make extra quarterly payments throughout the year so you are not hit with a big tax bill at one time.
8. Start A Health Savings Account
Having a high-deductible health plan (HDHP) is great for people who are in good health because the monthly premiums are lower and you have the option of contributing to a health savings account (HSA), which offers a triple tax benefit. An HSA can be used for qualified medical expenses throughout the year, but if unused, it can be invested and grow just like any other retirement investment. After you reach 65, all those contributions can be withdrawn tax-free for any reason, not just for medical expenses. (2)
9. Stay Away From Lifestyle Creep
This will depend on what financial priorities you have, but always strive to live within your means, not over. Having newer, bigger, and nicer things isn’t bad, but before you take a loan out on a new car or get brand-new furniture, ask yourself, “Do these things actually make me happy or could I use my money differently?”
10. Look For Ways To Increase Income
Being a pharmaceutical rep provides you many opportunities to increase your income so you can simultaneously reach your financial goals and have the lifestyle you want. Be proactive about earning promotions and working for companies who will pay you what you are worth.
Where Are You Financially?
Building wealth begins with being aware of your current situation. Are you already doing all of the above points or do you have a couple that still need to be checked off?
My name is Chris and I am the founder of Match Point Financial. I provide everyone with a complimentary, no-strings-attached meeting where we discuss your questions, concerns, and goals, as well as my process in working with clients so we can see if we’d be a good match. To learn more, contact me by calling 352-207-8014, sending a message here, or schedule a complimentary phone call using our online calendar.
Chris Reed is a financial advisor and the founder of Match Point Financial. Since 2002, he has been helping people make informed choices with their money and pursue their financial goals and objectives. He started his career with MetLife and has continued seeking to provide his clients with the best possible service through A.G. Edwards, UBS, and finally through partnering with Cetera Advisors LLC and forming his own independent firm in 2010. Learn more about Chris by connecting with him on LinkedIn or register for his recent webinar “Are Your Old 401(k)s Collecting Dust and Losing You Money?” here.
Financial Advisor: Securities and advisory services offered through Cetera Advisors LLC, member FINRA/ SIPC, a broker/dealer and a Registered Investment Advisor. Cetera is under separate ownership from any other named entity.