I strongly believe these three principles to “Think B.I.G. and Live B.I.G.” will apply to just about everyone reading no matter your income and financial position. This will help get you where you want to go which should ultimately be financial independence. Think about this, roughly 80% of millionaires are first generation millionaires, meaning they earned their wealth and did not inherit it. How about you? Are you ready? You can do this. Here’s the thing though, you have to be prepared to change your mindset and do what doesn’t seem normal and take actions that you’re probably not used to doing like BUDGET which will be the first principle I am going to discuss.

Budgeting for Financial Independence

This is the foundation of your tower of wealth and prosperity. Not a lottery ticket, a scratch off or a stock investment. Budgeting is the foundation. Ask yourself why is that you can’t seem have any money left over at the end of the month to be able to carry over into the next month. This is because you do not budget. Smart and wise people live below their means and budget! You gotta have a budget for everything and it doesn’t matter if you make $25k a year or $250k a year you still need to be accountable and responsible for where your money is going. The best method of budgeting I have found is when you assign every dollar you plan to spend a name. A name like, “Cell Phone Bill” or “Fuel” or “Groceries or “Eating Out/Fast Food” or “Credit Card Bill.” As you start your budget I want you to make sure you are taking care of the necessities in life like food, water and shelter. Once all your necessities are budgeted for, you need to analyze how much you will have to throw at any outstanding debts you have. If you don’t have any debt, GOOD FOR YOU! All you have to do is be sure to budget for investments and charities appropriately.

Some great free tools and resources I introduce in Habesha Finance are an excel budgeting template for you to use for free when you subscribe to my newsletter. This is my personal favorite, because it’s simple and easy for me to read and it’s available to me on my phone or laptop so I can update it regularly. There are apps out there like Mint, Goodbudget and Every Dollar that can help you budget as well. And let me tell you it takes a few months to get the budget just right, so don’t worry if you feel like you’re overspending, because the truth could be that you are just under budgeting. Just make sure you don’t budget like $300 for eating out, when you really can be using that money to get out of debt and buy groceries to eat at home.

When you start a budget, keep updating it daily with what you spend. This is a must! The more you make budgeting an everyday part of your life the more responsible and aware of your finances you will become. Honestly, I was always struggled to budget and now it’s fun for me and almost like a challenge that I am eager to take on. Like I mentioned before budget for things you need first, the primary purchases. Then work to take care of the secondary purchases and be wise. You don’t need to buy $200 pair of shoes, when you have credit card bills or student loans that need to be paid off as quickly as possible. Budgeting is the most important foundational principle I will ever talk about when it comes to thinking and living big. Start your budget today by subscribing!

Investing In Retirement

The moment you have that last month to budget debt out of your life will be the most financially freeing moment of your life. This is because now you can truly start to budget for investing. Investing is going to be a big part of your retirement portfolio and trust me, the earlier you start the better. Most financial experts recommend investing a minimum of 10-15% of your income into a retirement account like a 401(k) or your own IRA (Individual Retirement Account).The earlier you start the better, so 20 year olds do not delay. Even if you find yourself on the other side of 50 without any investments do not worry, because it’s never too late. My focus in this article will be about the basics of investing in a retirement savings plan. I am not too concerned about other investments, because at the very least you should have a 401(k), 403(b) or an IRA you are continuously building.

The first two types of retirement vehicles I am going to introduce are the 401(k) and 403(b) which are retirement savings plans sponsored by an employer. This is great for people who work for a company that offers matching incentives to what you invest, meaning you’re getting more money to contribute to your retirement. 401(k) is typically offered by a for-profit company and a 403(b) is offered to non-profit, government employees. Both the 401(k) and 403(b) are great ways for people to start their retirement investing and I encourage you to find out if your company has this available to you by asking your human resources representative. Also, for 401(k) and 403(b) you can contribute a maximum of $18,000/yr. Remember what I said for those who are over 50…you are allowed to contribute an additional $6,000 to your 401(k) or 403(b). Other key information to remember for both of these types of retirement savings plans:

• You don’t pay any taxes on your contributions for a 401(k) and 403(b) until you start withdrawing.
• You can start withdrawing from your 401(k) and 403(b) without paying any penalties starting at the age of 59 ½.

The next type of retirement account I want to introduce to you is a Roth IRA. You contribute into this account with post-tax earnings. I really like this, because a Roth IRA allows your contributions to grow tax-free. Think of your Roth IRA like a savings account that you have with your bank. If you are single, you must have a modified adjusted gross income (MAGI) under $133,000 to contribute to a Roth IRA for the 2017 tax year, but contributions are reduced starting at $118,000. If you are married, your MAGI must be less than $196,000, with reductions beginning at $186,000.If you own your own business or your employer doesn’t offer a 401(k) or 403(b) then a Roth IRA is a great way to start your long term investment. You can start an account with Fidelity Investments (this is who I use), Vanguard, Charles Schwab or TD Ameritrade. Some of these companies will have funds that are priced higher than others and so depending on how much you have to start your retirement account will determine which company you can use. However, these companies do allow you to do automatic withdrawals that I like, because it’s something you can build into your budget. Some quick tidbits about a Roth IRA: 

• Generally you can contribute $5,500 into your Roth IRA, or $6,500 if you are 50 or older.
• Withdrawals can be made on the contributions, not the earnings, without penalty until age 59 ½ when all withdrawals from your Roth IRA are penalty free and remember tax-free, since you paid taxes upfront.

I recommend you contribute the maximum ($5,500 or $6,500 if you’re over 50) first into a Roth IRA every year and then continue to work with a professional to look into other taxable investments and other asset classes, such as real estate. Make sure whoever you work with is keeping your IRA invested in what I recommend and personally invest my retirement account in, mutual funds that will grow with you. If you need help, please feel free to email me and I’ll help guide you getting on your retirement track and if I do not know the answer to your question I will help you find someone who can. You’ve worked too hard to not be rewarded later in life. Investing is truly taking steps today, to making leaps tomorrow.

Giving While Financially Independent

Budgeting and investing are nice and all, but there always seems to be something missing when you’re handling your money the right way and being responsible with your financial future. I believe it is the aspect of giving. In order to truly live big, I have learned that it’s my responsibility and duty to help educate and support others who are in need. When you can remember to give and support organizations such as places of worship, non-profit causes, or a widowed mom who has young children then you get something extra in return. That is the joy and happiness of changing lives for the better.Also, you begin to understand that money is not what life’s about.

Part of the Habesha Finance mission is to make everyone, from children to parents all responsible and good decision-makers educationally, professionally and financially. When it comes to your finances, giving plays an important role in your ability to control your money and live responsibly. Through giving you have an opportunity to change someone’s life for the better and there’s no greater reward than making a positive impact in this world. One word of advice would be to do your research if you do plan to give to a non-profit organization and make sure they are indeed legitimate.