Use seven steps to find financial freedom

In today's world, there are so many options for what to do with your paycheck, it can sometimes be overwhelming. Everyone's money issues and goals are different; some people are planning for retirement, others are trying to get out of debt. According to Waddell and Reed financial advisor Rene Russ, it's best to focus on both, no matter what age.

"If all you do is continue to live in debt, it's like living in a house in the basement with no windows," Russ said. "You're left wondering if you will ever see daylight."

Russ conducted a seminar at the Matanuska-Susitna Borough Small Business Development Center on Wednesday evening, where she highlighted the seven strategies to financial success.

1. Learn how money works. Russ says that in order to get a hold of your finances, it's important to grasp how money works -- not only in terms of purchasing power, but how money can work for you to create more money. While money saved for short-term goals should remain in the bank, savings accounts are not the best place for lump sums of money, no matter if it's $1,000 or $1 million. Because of factors such as inflation, you can actually lose money by keeping it in the bank over the long haul.

"If it's in the bank, it's going broke safely," Russ said.

2. Understand basic tax laws. This can be done either by researching the laws yourself, or utilizing the services of a financial advisor or accountant. The reason it's so important to know how taxes work is that you can work them to your advantage. There are many tax deferred accounts that you can put part of your paycheck into before federal taxes are taken out -- which allows you to save more money with interest.

3. Define specific goals. If you just dump your money into an account without specific goals, you're just speculating your future, says Russ. By planning what you actually need for retirement, a house or a vehicle, you are that much closer to obtaining your goals.

4. Protect against major losses. There is no certainty in life except change. Things will go haywire, and money needs to be set aside for your family to live on if you lose your job, or your life. A good rule, according to Russ, is to have enough money set aside to live for six months if you lose your job or become ill. It's equally important to have some sort of health insurance, life insurance and a will. Having these things in order builds a foundation for your financial plan; without protecting yourself it's much easier to lose what you have saved and earned quickly and without warning.

5. Develop a plan. Once you have your goals listed and have protected against loss, developing a financial plan is crucial, says Russ. This is also important if your goal is not to save, but to get out of debt. Russ suggests meeting with a financial planner to develop a plan. There are also a number of computer programs available that will walk you through developing a budget and financial plan.

6. Take immediate action -- do not procrastinate. The earlier you get control of your finances, the quicker your money will start working for you. Each day you wait to get your financial life in order is a day that money is lost. Interest earns more interest, so you can earn more for less if you start saving early on.

"The best asset you have is time," Russ said.

7. Pay yourself regularly. Skip a latt/ or brown bag your lunch -- each penny you save is a penny that can earn more for you. Even if you can't put aside much, put something toward your goals and your retirement each paycheck. Pennies add up to dollars, and dollars can add up to millions, if you are consistent and stick to your plan. By no means should you not enjoy things in life just to have money for retirement later -- but choose wisely. If you are a coffee fanatic and spending that money on a latt/ every morning truly enhances your life, by all means sip away. But maybe skip renting the Blockbuster movie that evening -- by doing so, you can watch your money add up and your dreams become reality.

Contact Jen Ransom at jen.ransom@frontiersman.com.