Top 10 Things to Make Sure Are on Your Financial Bucket List
Bucket lists allow us to turn our ambitions into an action plan. By writing down our wildest dreams, we take them from our imagination and lay them out in plain English. Our dreams become that much more real and, by default, that much more likely to happen. It’s easier to see the actions we need to take to achieve the goals after we’ve written them down.
But what about a financial bucket list?
Wouldn’t it also make sense to write down all we want to achieve with money? After all, we have to be free in our finances if we want to be free in our time. Below, you can find the top 10 things I think everyone should have on their financial bucket list. Achieving these 10 things can help result in more financial freedom and less financial stress.
1. Pay Off All Non-Mortgage Debts
Debt can be a huge burden that prevents you from achieving major life milestones like purchasing a home or even starting a family. When you look at your finances, I want you to feel liberated rather than trapped.
Sometimes we take on debt with good intentions. We use it to fund our education, buy a home, or get our business off the ground. But other times, we rack it up simply due to bad financial habits like impulse shopping or improper budgeting.
Regardless of the type of debt you have—or the reason you have it—debt demands to be paid back. And if you don’t act swiftly, your freedom can be further jeopardized by low credit scores and costly interest payments.
Aside from mortgage debt, which is being paid on an appreciating asset, you mustn't see debt as something that can stick around. Knock other debts out completely, and you’ll start realizing more freedom and financial rewards.
2. Have a Rockin’ Credit Score
Having an excellent credit score can be beneficial for many reasons. Not only will you have an easier time getting approved for important loans like a mortgage, but you’ll also enjoy more easily-approved rental leases, better insurance rates, and a slew of credit rewards that you can take advantage of (e.g., cash back or travel rewards).
There are multiple ways to improve your credit score and being consistent with your finances and managing them well is one of the best ways. Most importantly, pay your bills on time, don’t carry high debt balances relative to your credit limits, and don’t apply for too many loans at once. Repairing and raising your credit can be time consuming, but worth it on so many levels.
3. Create a Passive Income Stream
Active income is income that’s earned through work, like a job or career. You can think about active income as trading your time for money. Passive income, on the other hand, is income that’s generated from doing little to no work yourself on an ongoing basis.
Owning rental properties is one way to create a passive income stream (although many argue that real estate investment income is anything but passive, due to the time and work you have to put into maintenance, upkeep, and finding or replacing tenants).
Other ways to generate passive income include writing a book, investing in dividend stocks, engaging in affiliate marketing, or investing your money in something like peer-to-peer lending. If you’re a business owner, you can also look for ways to make your business more automated, create courses and memberships that you can bulk work into upfront, for less time on the backend.
Passive income is a fantastic way to earn. Unlike with active income, you actually free up more time when you earn passively. This can be especially beneficial as you head towards retirement whether it’s the traditional road or some version of FI/RE where you’ll want to have the option to work.
4. Make Life Work-Optional
Whether it’s through building enough passive income streams, a large enough nest egg, or both, being able to see work as optional is ideal. Even if we love our jobs, it’s best to be in a financial position where we don’t rely entirely on the job because of the income. This helps create peace of mind and allows us more freedom to choose the work we actually want to do. (This is actually my favorite financial bucket list item to have and help achieve!)
5. Achieve a One Million Dollar Net Worth
How awesome would it be to officially become a millionaire? It’s quite likely you’ll earn a million dollars or more over the course of your career. But earning a million dollars isn’t the same as having a million dollars. Net worth is the value of the assets a person owns minus the liabilities they owe, and it reveals how much money (or assets) you actually have at a single point in time.
Below is a hypothetical example of calculating an individual’s net worth:
Lisa owns her home outright, which presently has a market value of $500,000. Additionally, Lisa has a savings account and a stock portfolio that are worth $350,000 combined. Lisa has also taken out a $100,000 loan to expand her business and has a $20,000 auto loan. Her home and portfolio values are worth $850,000 together. Minus her business loan and vehicle debt of $120,000, her net worth is $730,000.
Even those with high incomes can have a low or negative net worth if they’re not paying attention to their assets vs. their liabilities. For example, physicians fresh out of medical school can start off with salaries in the high six figures, but their student loan debt holds down their net worth. So becoming an official millionaire by net worth standards is quite the achievement.
6. Have a Fully Funded Family Plan
Being able to support ourselves and our loved ones comfortably is one thing that makes work meaningful. When we know our effort is keeping food on the table for our family, it’s a heck of a lot easier to get out of bed and go to work every morning.
Ideally, however, what you earn should cover a lot more than just your family’s food, water, and shelter. You want your family to never have to worry about money, period. Fully funding your family’s needs and wants—both now and in the future—is a great goal to add to your financial bucket list.
For your kids, this could mean fully funded 529 plans so they can graduate college debt-free. For your spouse, this could mean you having the necessary life insurance, investments and savings accounts that protects them in the event of your death. And for your aging parents, it could mean covering the costs of a retirement home or in-house caretaker.
7. Pay Off Your Mortgage (When It Makes Sense for You)
There’s a certain pride that comes with making a final mortgage payment. Your home truly becomes your home—not the bank’s. And the money that was eaten up by fixed or variable interest rates over the last 15 to 30 years is finally freed up for better use.
By paying off your mortgage, you’ll have more money to invest, enjoy a lower monthly cost of living, and have less financial stress. And should you rent out your fully paid-for home, you’d even start to generate income from the rental payments.
However, paying off a mortgage early isn’t right for everyone. Young professionals may do better to invest their extra money in today’s low-interest debt environment rather than pay off the mortgage faster. On the other hand, pre-retirees may want to pay off the mortgage early so they don’t have to worry about making mortgage payments on a fixed income. This is where personal finance decisions become, well, personal.
8. Become Wildly Generous
The greatest gift really comes from giving rather than receiving. And this isn’t just some cliché positive-thinking seminar logic. There’s some serious science backing it up.
Studies have shown the positive impacts that charitable giving, volunteering, and activism can have on our minds and bodies. So figure out how you can add giving to a cause you care about—whether it’s with your money, your time, or both—to your financial bucket list.
9. Treat Yourself Big Time
There’s no reason why your financial bucket list can’t overlap with your regular bucket list. It’s important to take time to enjoy the fruits of your labor. So go through your main bucket list and use the money you’ve freed up from completing the other items on your financial bucket list to bring those dreams to fruition.
Always wanted to visit Europe? Go book the flight and hotel. Dreamed of owning that certain sports car ever since you were kid? Head to the lot to pick up the keys. Of course, you shouldn’t be reckless with your finances, but it’s things like this that become possible when you know your money intimately, set yourself up for success, and know the reason behind your goals. Money should be enjoyed as much as it should be saved.
10. Establish a Legacy
You’ll want to make sure that what you’ve built lasts long after you do. Building your legacy can be accomplished through a variety of financial means. Building a legacy can involve, but is certainly not limited to:
Succession Planning: For business owners, succession planning is an essential process to ensure your business lives on when you’re ready to retire. Succession planning involves devising a strategy for your company to leverage when passing down leadership roles in the event key members leave, retire, or pass away.
Estate Planning: This process involves determining how your assets will be maintained, overseen, and distributed upon your death or incapacitation. Estate planning gets more complex the more complex your financial situation.
Writing Your Will: Writing a will is actually a part of the estate planning process. Your will is a legally enforceable declaration of how you want your assets distributed after your passing. Additionally, your will should include guardianship designations for your pets or children who are minors.
Even though establishing a legacy comes last on this financial bucket list, legacy planning should actually be one of the first things you complete on your own bucket list. It’s impossible to predict the future, and you don’t want to wait until it's too late to establish your legacy.
Ready to Get Going on Your Financial Bucket List?
We’ve got you covered at Financial Fitness Coaching. When you work with us, we get to know you and your wildest dreams and goals—those that are purely financial and those that may not seem like they’re related to your finances (at first glance).
We love helping business owners create their own unique financial bucket list and develop strategies to check things off with ease. To see how we can help you and your business, email me at kristen@financialfitnesscoaching.com or simply schedule a free 20-minute Discovery Call on my calendar below.