Fireproof your Finances

fireWhat do I mean by Fireproofing your Finances? It is simply taking stock of where you are financially and making your finances rigid towards external negative forces on your pocketbook. It means taking a good hard look at your budgeting and meeting your expenses with ease. The first step to fireproofing your finances is to decrease the amount of cashflow going out. Especially, cashflow that you do not even know where it’s going. This is equivalent to bleeding and you’ve got to stop the bleeding. If you journal what is going out in your daily spending you will catch where non-essential spending can be capped. See my post, ‘Get your Finances in Order’ for a good primer.

Second, you need to protect the income you have now. How do I do this? Simple, you want to keep the most targeted insurance in place. You need at least term life insurance to protect your family, health insurance to cover unexpected medical and maybe at least disability insurance if you cannot work. The wealthy know this and you will not find hardly a wealthy individual without these precautions in place. So, work on these if you haven’t got all three at least. Even if that means cutting out a personal cell phone expense e.t.c. to get there, do it. It’s paramount to fireproofing your finances.

Third, you want to be able to make good friends with your tax attorney. As I speak, the U.S. is looking to find ways to once again tax the little guy. Go through with your tax attorney, vehicles that help you write off taxes and some that you can invest in almost tax-free. We are being taxed to death and you have to minimize any negative effects this will have on your income.

Fourth, you want to find a way to maximize your income streams. If you only have one income source now, you want to work on getting other income sources that you don’t have to work for if possible. This is called passive income and you can read the book, ‘Multiple streams of Income’ by my friend Robert Allen as a good primer on this. Some examples of passive income could include: property you might rent for positive cash flow, a systemized business that generates at least a paycheck every month, an online business on auto-pilot and many others. Do these fundamental requirements and you will be well on your way to Fireproof your Finances.

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Category: Financially Elite Blog