5 Financial Skills To Make Life Abundant
I think spending abundant life is what most people are hoping for.
Many people would love to do something that they love but couldn’t do while working before retirement.
How should we prepare now in order to spend abundant life we have been all dreaming for?
To spend an abundant life, we will need certain amount of assets. I would’t say only the assets are all you need, but if you have enough assets that make your life easier and enjoyable, you will have a peace of mind.
In order to increase your wealth, you will need five financial skills.
- Ability to save
- Ability to earn
- Ability to increase
- Ability to protect
- Ability to spend
Ability to Save
This skill is whether you can save money and how you save.
If you want to save money, your spending must be lower than your income.
If your spending is higher than your income, you need to review and control your spending for both non-discretionary and discretionary items.
This is the first step to increase your wealth.
Ability to Earn
Ability to earn is how you earn and secure income for your living expenses.
There are various types of incomes, such as monthly salaries from an employer, income from your own business or side business.
You need to be able to earn at least the amount that covers your expenses for the necessities.
If your income is not enough to cover your living expenses, you need to do one of the followings:
- Increase your income
- Reduce your expenses
Ability to Increase
This skill is related to further increasing the assets you have built by investing.
If your income is more than your expenses, you will be able to save money. After you made some savings, you should put some of the savings into investment.
You can use various investment vehicles, such as CD, Money Market Fund, stocks, mutual fund, ETF, or real estate investment.
Unearned income from the investments such as dividends and rental incomes are included in this category.
Ability to Protect
This skill is to protect and keep the assets that you have built and not to lose them.
Some examples are not to pay unnecessary interest, to reduce taxes by legally using some non-taxable incentives or vehicles, and avoid financial fraud.
You may also lose your assets by spending on something which value will decrease quickly, such as expensive cars.
Ability to Spend
I think the fifth skill is the most difficult one to acquire.
If you don’t carefully spend the assets you have built, they can be all gone quickly.
For most cases, spending will occur after you retire. At that point, you may no longer earn salaries or income from your business, and need to start withdrawing your assets.
How you should be withdrawing your money during the retirement is one of the most important issues.
The withdrawal plan needs to be carefully reviewed and created so that the assets won’t run out during the retirement life.
I will be discussing each skill more in details in the following blogs.