Do You Know Where You Are now Financially?
This is an article that is talking about the financial self assessment that will let you know where you are financially. This is the most basic step for our giant financial goal. So let’s see how we can do it.
When comes to money or personal finance, people will think that the main problem that they are having now is not enough money. They just blame and think that all the financial problems are because of not enough money. So in order to solve the problem, they just keep finding the ways to make more money.
However making more money does not solve our financial problem. Good financial planning and money habits are the way to solve our financial problem. Without them, even though you make millions of dollar, the same financial problem will still follow you.
There are many ways to get started in financial planning and people are confusing with it. However, it will be easier to make the plans if we know where we are now financially and understand all the strength and weakness that we have in our finance. This is why a simple financial self assessment is very important and we must make it as the first step before we make any financial decisions or plans.
Financial Self Assessment
Now let’s get started with the financial self assessment so we can understand where we are now financially. I’m going to show you the financial assessment that I learn from The Cashflow game, a product from famous book author, Robert Kiyosaki. We will use the same theory of financial statement in the game to do our self assessment. This is the simplest and easiest to understand financial statement that I ever read.
Without further ado, here are the steps for financial self assessment:
- Collect all the data. First you need to collect all the data such as your incomes, expenses, bills, bank statements, assets, liabilities and etc. Yes, it might be troublesome to do so, however, don’t worry and just do it. It will be getting easier as you go on and eventually it will be your habit one day.
- List down your data properly. Now please list down all the data you have collected in a piece of paper or type it out in your excel file. There are actually 4 kinds of main categories: Incomes, Expenses, Assets and Liabilities and all you have to do is categorize all your data according to the categories.
PS: According to the book Rich Dad Poor Dad, Assets are something that put money into your pocket and liabilities are taking out money from you. So please use this concept to determine your assets and liabilities here. - Put a value and add them up. Now give a value to all your data. List your income, expenses, assets and liabilities and give a value to each of them. After that add them up and get a total figure for each category.
- Analysis over the figure. Now you should have all the needed data listed properly. Then we can do some calculation or analysis the figure and find out what is the “health level” of your finance.
Analysis that you cannot miss….
So with the data you have right now, we can go through some calculations and analysis to find out how wealthy you are right now. Below is some of the analysis that is important for you:
- Net Monthly Cashflow – First, you deduct the total expenses from your total income. The balance will show you how much money you left each month. This money is very important as it is the extra money that you can use to build your emergency funds, savings, investment and etc. Of course, your job is trying your best to make this number increase positively. To do so, you must learn how to increase the income and decrease the expenses or manage your money wisely.
- How you make your income – How you make money? Through a job? Through a business? Or do you have incomes from business and investment. No matter how you make money, it is quite dangerous if you depend on one kind of income to survive. What about you loss the income? Can you imagine this? So your target is trying to find more income source or build multiple income source of income. For example, while working for somebody, you can start a part time business or invest your money in real estate and generate extra passive income.
- How you spend money – Are you paying multiple credit card debts? Do you own a car that you cannot afford right now? Do you spend so much money to buy something that not really necessary? From the expenses column, you will find the answers. Like what I said just now, it is important for you to learn how to spend and manage your money properly. Make money and spend money have to work side by side. It is risky If you make $100,000 per month and you spend $99,999 or more.
- Assets VS Liabilities – Which one has more value? This is the first question that you must ask yourself. Well, I can say that there are plenty of people have more liabilities than assets. However, for a good and healthy finance, you must own more assets than liabilities.
- Paying too much of debts – Now look at your expenses and liabilities sections, Are you paying too much of debt? If you are paying more than 20% of your income for debts, then you are having too much of debts and you must figure out a way to reduce it.
Conclusion
The purpose we carry out a financial assessment is we must know where we are now financially. If we have too much of debt, then we must make a plan to pay them off. If we spend more than we earn, then we must pay attention on our spending habits. If we have more assets and high income, then we just carry on what we are doing now or even increase the speed. Different condition will have different kind of actions plan. This is why I said financial assessment is the basic step for our big financial goals.
Prepare Your Mindset to Achieve Financial Freedom
This is an article that about the mindset that you must have in order to achieve financial freedom. If you want to achieve financial freedom or want to have a better financial future, then you cannot miss this article.
If you ever read any personal development, self help or financial books before, you will find that mindset is one of the main topics that are discussed in the book. This is because our mindset is the basic that determines how we take action, what we believe and what kind of targets we will set. This is very important for us to achieve something in any subjects.
We need different kind of positive mindsets for different goals that we set. This is why every expert will talk about the mindset that you need in their books. They want to ensure you have the correct mindset to achieve what you really want.
The condition is same with achieving financial freedom. If you want to be financial free or have a good financial future, then you must find out what is the correct mindset that will help you to achieve it.. Change your mind, change your will and Change your Life.
What are the Mindsets that You Need to Achieve Financial Freedom
So without further ado, let me show you some of the mindsets that you must have if you want to achieve financial freedom. Every one of them is crucial in the journey to financial freedom:
- EQ and FQ are as important as IQ. All of us know what IQ is. This is very important for us to gain knowledge and learn something. This is important in information age today. However, in the world of personal finance, EQ(Emotion Quotient) and FQ(Financial Quotient) are also important. EQ is about our emotion intelligence and how we control our emotion and react on each emotion such as fear, worry, angers and communication skills. This is very important for business owners and investors. FQ is also important and it is about our financial literacy. This is about how we manage our money, how to invest and financial planning. As you can guess, you need financial knowledge to manage your money in profitable way. So start from today, you can start reading some books about emotion intelligence and personal finance books.
- Failure is good, making mistakes is even great. How we learn? I believe we learn the most from our failures and mistakes. However, I found that today’s education system has changed our mindset that failure is bad, making mistakes should be punished. This already blocks the way we take actions unconsciously. In school, we also learn the skill of analysis, so we tend to analysis every possible before taking action because we afraid of fail and make mistakes. If you pay attention on this, most highly educated people is hard to take action because they afraid they will make mistakes. However, if we never take any actions, we won’t go anywhere but only just stay the same and keep dreaming our goal. Now if you know that you want to achieve financial freedom or have a better financial future, please adapt this mindset and stand up. Dare to fail, dare to win.
- Taking Risks. Afraid of taking risks is the biggest obstacles for us to achieve financial freedom. Every investment in this world has some risks and usually the returns of the investment are depending on how risky it is. Highest risks equals to more returns. I’m not saying that we simply take some risks and make money. I usually call this gambling instead of investing. Before we take risks, we must know how to handle the risks and minimize it to the minimum level. This is how the rich invests. They learn the games of investing and play accordingly. For example, you invest in stock market, you must understand the risks return ratio, exit strategy and strategy to handle all the unexpected factors. This is why I said FQ is important as it will help you here.
- Buy Assets to support your liabilities. Here I would like to use Rich Dad’s advice to define what assets and liabilities are. Assets are something that brings money to our pocket while liabilities will take money out of it. So your goal is always buy assets before your liabilities. For example, you dream to buy a luxurious house for your family. So you should find a few rental properties, so that you can build up a positive cashflow from them to support your luxurious house’s expenses. Always buy assets to support your liabilities. Assets first, liabilities last.
- Always Think Long term. Achieving financial freedom is a long term goal and long journey for your life. So you must think long term too. In fact, thinking long term means you consider and visualize the consequences each time you do something. For example, today you buy a few real estate books and want to read it. This may increase your expenses on your bills and you seem don’t receive anything from it. However, if you look for long term, these education materials will train your brain and help you to generate massive of money in future. Today you lost money, however, it may make your money in future. However there are some kinds of people who cannot accept this kind of mindset. So just think long term each time you spend your money or even spend your time to do something.
- Think Big instead of small. Let me ask you a question, why think small? Thinking won’t cost us any money or hard works so there are no reasons why we should block ourselves from thinking big. So you should think big but take small steps. This is the way to achieve anything in this world.
- Always learn and ready to change. Our world is changing very fast. In order to survive in this world, we must learn and change fast too. From my observation over the rich and financial free people, I found that they love to learn something and always ready to change according to the market. This make them can survive in any condition or even stand out the crowd and make a lot of money.
Change Your Mind and Change Your Life
Start from today, you can start creating a new truth about yourself and change your mindset to achieve anything. Once your mindset is correct, then everything you do and think will bring you to achieve anything you want to.
Find the Reasons Why You must Achieve Financial Freedom
This is an article that discusses the importance of “WHY” in the process of achieving financial freedom. Without a “WHY”, you go nowhere in your journey to financial freedom. Let’s find out more below.
Do you want to achieve financial freedom? If Yes, do you have the concrete reasons on WHY you must achieve it?
I have a few friends who also like me and want to achieve financial freedom in their life. However, they never take any practical actions or have any serious plans to achieve it. All of them know what they want for their life. They want to stop working for money. They want to travel around the world at their young age. Some of them even want to watch their favorite football team practicing every day. So I can say that they know the “WHAT” they want for their life. They want to achieve financial freedom!
However, they never take any practical actions or have any plans to leverage on their job and become financial free. They just keep thinking their dream but never take any serious actions to achieve it.
Do you know why they act like this? This is because they don’t have any strong reasons to support their “WHY” to achieve financial freedom.
The WHYs for Being Financial Free
You want to achieve financial freedom but it only just an end results that you want. In fact, it is nothing and it won’t give any motivation for you. Just like my friends, they want to stop working for money and do something that they want to do. They know the lifestyle (end results) that they want but it only a dream for them if they don’t take any serious actions.
Knowing the “want” is not enough to support you to achieve financial freedom. You must know your WHYs to support your dream and your “WANT”, so that you will take actions.
A “WANT” usually is a pleasure and “WHY” is usually a pain for us. According to the world famous success coach, Anthony Robbins, human always act to avoid pain and gain pleasure and the power to avoid pains is usually greater than the power to gain pleasure.
So from here we know that it is not enough motivation for us if we only know what we want. It only a pleasure for us and pleasure has the least effect over our motivation. So we must build some WHYs around to add more will power on our goals. If you have the enough why to do something, your mind and body will take action automatically!
My Suggestions on the WHYs to Achieve Financial Freedom
If possible, please think some of the most financial pains that you have right now or before as your main reasons.
For example, before this the main reason why I want to achieve financial freedom was I don’t want to work hard like others to make money. However, this why is not strong enough and I never take any serious actions at that time.
Until one day I found my new why that I want to achieve financial freedom because I don’t want to have those financial disasters that my parent had – being in debt and not enough money. My parent has no choice and suffers from not enough money for so many years. From them I know that the pain of not enough money and also lack of choice. Then I set my mind that I build enough wealth to let both my parent and me financial free!
Well, after that I start to take some serious action and I can feel that I’m approaching my goal every day.
Besides that please change and modify your way according to your personal experience. The more actions I take, the more I learn and my experience are kept increasing. So through my new experience, I will modify and add more WHYs to support my goal so that I am motivated and take more action easier.
Last but not least, write your whys down. For me I type it in my planning excel file and save it in my notebook. I will open it every day and read through it. So I can remind that I made a goal to achieve financial freedom with several whys I must do this.
Conclusion
Please remember that reasons or WHYs can be your great motivation power. Besides achieve financial freedom, we also can use this theory and apply it in any goal that we want to achieve. So if you found that you are not motivated enough to take some action towards your goals, then your WHYs are not strong enough. So you just think some concrete and reasonable WHYs for your goal, write it down and read it every day. Then you will be motivated enough to take action.
