Declare your financial independence

The casual historian might mark July 4, 1776, as the beginning of the American Revolution. In reality, the war began more than a year earlier with the battles of Lexington and Concord. But the Declaration of Independence marked the point of no return; our founders were committed to liberty or death.

Just as it took a formal written declaration to galvanize and commit our forefathers to national independence, the same sort of effort is required to put ourselves on the path to financial freedom. So take some time this month to create, update or modify your own road map to financial sovereignty. You can start by considering the following tenets as you develop your own guiding financial document:

I shall live within my means. This sounds so basic, but it’s a powerful commitment with broad-ranging benefits. It’s not a stretch to say our founders would be shocked at our nation’s present state of financial affairs – as individuals and as a nation. As I’ve said before, spend less than you earn and save some to boot. There’s a simple tool that will enable you to live up to your declaration: a budget. Set aside time to list your income vs. expenses and savings. Look for places to cut back if the numbers don’t work. Make a document that guides you through your daily financial life.
If living within your means becomes one of your guiding principles, you’ll avoid crippling debt, have money in the bank and lay the foundation for a financially sound future. As Ben Franklin said, “Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones.” That’s true of your financial net worth, too.

I shall prepare for the unexpected. Last fall, when the government was on the verge of a shutdown, many folks were concerned about being able to pay the bills if they missed a paycheck or even half a paycheck. The congressional battle over the budget was truly disconcerting. But the idea that so many people would be financially crippled if they missed a single paycheck bothered me more.
Start building your emergency fund now. Setting aside $25 or $50 per paycheck into a savings account is a good start. And commit to a periodic review of your life, home, auto and other insurance policies to ensure they offer the appropriate amount of protection at the right price.

I shall responsibly use debt. If you don’t use it at all, I won’t be offended, but with cars and houses it’s probably difficult to be a cash buyer. Just remember: credit cards should be used for convenience or rewards points, not as a tool to spend more than you have. Use credit in the context of “living within your means.” Make timely payments and check your credit report periodically. Payday, title or tax-refund anticipation loans shouldn’t be part of your financial toolkit.

I shall save for the future. Don’t put it off any longer. Start using the Thrift Savings Plan, set up an IRA or put away funds for the kids’ education. There are hundreds, if not
thousands, of resources to help you learn more about saving and investing, but only you can decide to get started.

As we give thanks for the good fortune of being born in the world’s greatest nation and celebrate the courage and sacrifice of those who founded it, commit to these four financial declarations. I’m certain they’ll aid in your quest for “life, liberty and the pursuit of happiness.”

J.J. Montanaro is a certified financial planner for USAA, The American Legion’s preferred provider of financial services. Submit questions for him online. www.legion.org/focusonfinances

This material is for informational purposes. Consider your own financial circumstances carefully before making a decision and consult with your tax, legal or estate planning professional. USAA means United Services Automobile Association and its insurance, banking, investment and other companies. Banks Member FDIC. Investments provided by USAA Investment Management Company and USAA Financial Advisors Inc., both registered broker dealers. USAA Financial Planning Services® refers to financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California), a registered investment adviser and insurance agency and its wholly owned subsidiary, USAA Financial Advisors, Inc., a registered broker dealer. Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and Certified Financial Planner TM in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Visit USAA's personal financial planning page: www.usaa.com/inet/pages/financial_planning_personal_plan