A new study finds 31 percent of adults could last only a few months on their savings if they had to retire. Financial security expert and bestselling author Pamela Yellen explains what it takes to achieve financial freedom as we prepare for Independence Day.
What does it mean to be financially independent? According to Yellen, author of the New York Times Bestseller “The Bank On Yourself Revolution,” it means having a financial strategy that allows you handle whatever challenges life throws at you. Here are here 3 steps:
Step 1: Build a sizable liquid rainy day fund: To have the security of a real safety net, why not build a fund equal to at least two years of your income? Put that money in a place that is safe and liquid, so you can easily get your hands on it when the proverbial you-know-what hits the fan. “Does it seem impossible? You probably won’t build this fund overnight,” Yellen advises. “But if you increase your savings by even just 1 or 2 percent each year, you won’t feel the pinch, and you’ll be surprised by how quickly your rainy day fund will grow.”
Step 2: Convene a family council: Create your family’s “Personal Spending Rules” together to work toward family goals and help you make spending decisions today that build happiness for you now and in the future. “Your children will not only learn good financial skills through this process but they’ll take pride in being part of it,” she adds.
Step 3: Do you need it or just want it? Before each purchase, get yourself off emotional autopilot. Take a deep breath (and a couple of days) to consider whether you really need whatever you are thinking about buying.
“Financial stress seems to have become the new normal for most of us, but it’s not inevitable,” Yellen said. “You don’t have to panic about your present or agonize about the what-ifs in the future. You can achieve financial peace of mind so you can weather whatever curve balls life throws at you.”
Pamela shares a time-tested saving strategy she calls “the greatest wealth building tool of the last two centuries.” This method, known as Bank On Yourself, provides guaranteed growth, pays taxes in advance, and gives people access to their savings without restrictions or penalties whenever they need it. Most importantly, it allows people to know exactly how much money they will have upon retirement and every step of the way.