A few weeks ago, while chatting with Bronwen Drummond, a financial advisor, it hit me hard that court reporters and videographers, independent contractors, need to have a financial plan to protect their future and understand what is happening with any money they are making. I know I used to just work, work, work, and not pay attention to what was happening because “that’s not my thing.” At the age of 50 I decided to make it my thing, and now I feel more calm about the future.
I asked Bronwen if she would create for me a checklist of thinking points for court reporters and videographers. Here is what she advises:
1. Establish a foundation that includes a budget, “Save first and then spend what’s left over. Rule of thumb for allocating your spending – 20%/60%/20%. 20%should be spent on saving and investing. 60% of your income should be spent on essential expenses, i.e., rent, mortgage, food. 20% can be spent on discretionary expenses, clothing, dining…
2. Establish an emergency fund. Have 3 to 6 months of living expenses saved. Protect yourself against the unexpected.
3. Risk Management – Protect yourself and your family from financial peril with disability insurance, health insurance, and life insurance.
4. Debt Management Strategy – Educate yourself on the difference between healthy debt (debt that is tax deductible, i.e., mortgage, student loans) and unhealthy debt (credit cards). DO NOT live on the mentality that you need to pay off your debt before you can start saving.
5. Wealth Accumulation – Create a strategy for growth! Where can you put your money so it works for your short-term/mid-term/long-term goals? Short-term goals are what you want to accomplish between now and two years from now, i.e., down payment on a home. The place to save your money for a short-term goal might be in a checking or savings account. This is also where you put your emergency fund (3 to 6 months of expenses). Mid-term and long-term goals, such as retirement, would use stocks, T-bills, bonds, and mutual funds; real estate.
I have read many experts opine that a third of your savings should be in cash, a third in stocks, bonds, mutual funds, and a third in real estate. The bottom line is having a strategy, setting goals, and then taking the steps to achieve the goals. Being financially literate is truly not that hard. It just takes some focus and perhaps a professional advisor along with your accountant and banker (your team) to help you understand where there might be tax savings, what products are on the market that would be perfect for you, and a plan.
I wish for everyone great success and a wonderful future. We deserve it.
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