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Seven Strategies For Financial Success

    What factors help some people achieve their financial goals while others who earn the same amount of money (or more) live "paycheck to paycheck"? A number of recent books have explored factors associated with financial success. Listed below are seven specific strategies that can help you improve your financial fitness and achieve your dreams:

    
• Set Specific Goals--Put a date and price on each financial goal such as "save $6,000 for daughter's wedding in 2004." Once you have a total cost, you can break it down into smaller pieces, such as "save $2,000 a year for three years" and even smaller pieces, such as "save $167 per month."
    
• Focus on Succeeding--Remember the old saying, "when there's a will, there's a way"? It is as applicable to personal finance as it is to other areas of life. It takes discipline and focus to postpone spending today for a goal that may be years, even decades, away. That's why having specific goals is so important. They provide an incentive to save and something to strive for.
    
• Live Below Your Means--There are four ways to "find" money to save for your future goals: sell assets (e.g., have a garage sale), increase income, reduce expenses, or do a little of each. Living below your means is an intentional process of spending less than you earn and saving the amount that is left over.
    
• Automate Your Savings--Once you make up your mind to save, the next step is taking action to do so. The best way to save is to do it automatically through an employer 401(k) or 403(b) plan, credit union, or mutual fund automatic investment plan (AIP) that deducts periodic deposits from a bank savings or checking account.
    
• Borrow Carefully--Another key to success is keeping debt low and paying the least amount possible for borrowing money. When monthly debt payments exceed 15% to 20% of net (after-tax) income, many families experience financial difficulty. In addition, money spent on debt repayment is unavailable to invest. Even those who aren't having trouble paying bills may be paying more for credit than is necessary. Strategies to reduce credit costs include negotiating a lower interest rate from creditors, transferring outstanding balances to lower-rate credit cards, and adding the payments for repaid debts to remaining ones.
    
• Maximize Tax Breaks--These include tax deductions for contributions to tax-deferred employer retirement plans, tax-free municipal bonds, and the 20% or 10% (depending upon your tax bracket) long-term capital gains tax rate on investments held more than a year. Other frequently-used tax breaks include the child, dependent care, and earned income tax credits and itemized deductions for state and local taxes, business expenses, and charitable contributions.
    
• Develop Financial Resilience--Resilience is the ability to "bounce back" when bad things happen to good people. This includes unfortunate life events such as illness, unemployment, and divorce. Financial resilience is increased with adequate savings, low household debt, current and in-demand employment skills, a social support system, and community resources, such as non-profit human service agencies that provide cash or other assistance.