Achieving financial independence, which means getting to do what you want to do – whether it means choosing to work for the rest of your life or retiring at a certain age to pursue the next chapter in your life – is what most of us strive for.

The number one reason why many fail to achieve this goal, said Frank Jaffe, a Certified Financial Planner with Access Wealth Planning, the wealth management firm in Roseland, and a frequent writer and lecturer, is procrastination.

13 Commandments Handed Down For Smart Personal Finance

“It begins with failing to put together a plan that includes your short and long-term goals and then carrying through with it,” said Jaffe.   “Putting your goals in writing gives a sense of commitment.”

To help people better understand what it takes to achieve financial success in an organized fashion, Jaffe offers his “13 Commandments” or principles that, when followed, can help create an action plan to organizing your financial life.

Smart Personal Finance: The Thirteen Commandments

Here is a brief look at each:

  1. Know your goals.  This means trying to step back and say, “Where are we going? How are we going to get there?”  While it doesn’t necessarily mean having all the pieces in place, said Jaffe, you should be able to identify the goals and a few actions that will bring you closer to achieving them.  He encourages clients not to be afraid of dreaming a little, but to also make sure the goals are specific, measurable, realistic, and even a little challenging.
  2. Don’t be paralyzed by past mistakes. Most people, even those who are highly successful and intelligent, have made bad investments at some point in their lives.  The important thing is to learn from your mistakes and move forward. “Stressing about the past is not a productive activity,” Jaffe reminds us.
  3. Develop a plan. A goal without a plan is nothing but a wish, said Jaffe.  You also need to be flexible enough to re-calculate as goals and situations change. This is where a trained and certified financial planner can be an asset, monitoring your performance, how it measures up to the market, and whether or not you are on track to meet your stated goals.
  4. Know your cash flow. This is the financial equivalent of taking your blood pressure. “It’s not about putting you on a budget,” said Jaffe. “It’s about knowing how much money is coming in and where it is going. You might be surprised at how much you are spending on certain items.” Having a handle on your cash flow combined with knowing your goals will help identify possible changes that can be made to help you achieve your objectives.
  5. Plan your major celebrations without stress. Planning for a child’s wedding?  Rather than incurring excessive debt, consider scaling down the event to reduce stress. In addition, if there is enough time and with proper planning, there may be ways to save well in advance.
  6. Understand your liquidity. Liquidity is the ability to convert your investments into cash quickly.  Liquidity is valued because life is dynamic and your need to move quickly may be necessary – whether it’s due to an opportunity like a good investment, or an unforeseen expense, like a flood in your basement.
  7. Know and manage your risk. Things go wrong; accidents happen. Whether it relates to a downturn in your health or your finances, you want to protect your family. Understanding your insurance options is an important part of every financial plan.
  8. Plan for financial independence. Knowing when you can retire and having some confidence that you will have enough money is what financial independence is all about. The financial planning process can help you project your retirement at a given age based on such things as assumed income, expenses, inflation, social security and savings.
  9. Establish an estate plan. This gives you control over your money and your children’s future when you’re gone.  Unfortunately, too many people relegate this to the bottom of their list.
  10. Manage your taxes. Your accountant and financial advisor should be talking when it comes to your tax planning. You should have a strategy in place that will minimize your taxes while helping you achieve long term value.
  11. Manage your debt. Carrying debt creates anxiety and stress. Credit card debt in particular often results in interest rates exceeding 20 percent! It’s important to do whatever it takes – from borrowing from a home equity line of credit to asking family members for help – to pay down such a debt. This ultimately frees up funds that can be relegated elsewhere.
  12. Understand your investment strategy. Your investment strategy should be tied to your goals, time horizon and risk tolerance. Having a plan guides you so that you avoid the type of panic that can lead to making bad decisions in certain situations, such as during a volatile market.
  13. Putting it all together. Simply stated, this means looking at the big picture and feeling confident you have ‘crossed your T’s and dotted your I’s.’ Be sure to prioritize your needs and talk with a professional who can offer independent advice.

“There are a number of formidable challenges that get in the way of financial independence,” said Jaffe.  “Following these principles can lead to long-term success.”