Before you start the journey to financial freedom, you must know your net worth.
It’s after you know your net worth that you can know how much wealth you need to gain financial freedom.
Why? Because your cash flow is the single most important factor in accumulating wealth.
The more cash flow you have more than your current expenses.The less you have to worry about money.
Unfortunately over 90 percent of working adult Americans lack the understanding of managing money.
An online consumer survey done on adult Americans found that more than 70 percent of them do not know how to balance their checkbooks.
Poor financial knowledge is one of the main reasons why many working Americans end up broke and have to continue working after retirement age.
An article published by Bloomberg Newsweek reports that about 7.2 million Americans 65 years and older work full time in 2012, which is a 67 percent increase from a decade earlier.
The article cited the case of a 77-year-old that earned a six-figure at the height of his corporate career and flew first class on business trips.
Today the same man now juggles two part-time jobs that are about one-quarter of his former salary.
The gentleman went on to say that his only regret was that: he wished he had invested wisely for retirement at the peak of his career.
I was humbled reading this story because I know many retired people in their senior years that are in the same situation.
That is why I am writing this article. So that you avoid the mistakes many people make about investing their money.
Before we start, I want you to do a brief exercise on your financial literacy test
Rate yourself on the following questions:
Give yourself a score of 1 if you answer yes and 0 if you answer no to any of the questions.
- Do you know your net worth?
- Do you know how much debt you owe?
- Do you know your monthly expenses?
- Do you know how much you spend on monthly expenses?
- Do you do a check your credit record and know your credit score?
- Do you have a retirement savings plan in place?
If you scored six this means You are financially aware keep on doing what you are doing.
If you scored less than three then you have work to about getting financially literate.
If you scored 0, it means your awareness of your financial matters needs fixing.
Are you financially literate?
Financial literacy is when you understand how money affects your life. When you are financially literate, you have the ability to perceive opportunities to become wealthy
On the other hand when you have no clue about how money works you are blind to opportunities for becoming rich.
As a result, you make bad decisions with your money that make you poorer.
How you spend your money is the most important determinant of your future wealth.
In other words, your spending habits determine if you’ll end up broke or retire comfortably in your senior years.
What separates a financially successful individual from the average person is that they are competent in wealth building which the financially unsuccessful lacks.
The good news is you can also learn to become financially successful.
All you need is a willingness to learn and practice financial literacy.