Planning for your financial future can seem like a daunting task, but it does not have to be. Finances can be confusing and there is a bit of a learning curve, but there are a few key things you should do if you are trying to secure your financial future. You do not have to be rich or extremely wealthy to have a secure financial future. However, you do need to pay attention to your finances and be willing to make changes when needed. Here are four things you should have to help ensure a secure financial future.
By now, this should be obvious. But you would be surprised how many people do not have even a minimal amount of savings put aside for a rainy day. An emergency fund is meant to be a protection or financial buffer in the case of some unforeseen expense.
At any given time there are a number of unexpected expenses that could arise, such as a car repair, home repair, health issue, a layoff and more. Life happens, and in order to help protect our finances from taking a major hit, it is important to have some sort of savings set aside to help get through a financial rough patch.
It is recommended to have at least three to nine months’ worth of expenses in your emergency fund. This is so you won’t have to turn to high interest credit cards, if you need to come up with money quickly. If you do not have any savings, start small and make saving a habit, and before you know it, you will see your savings add up.
You’re young, just getting settled in your career, or possibly just had your first promotion, so retirement seems like it is too far off to even think about. Ironically enough, this is the exact period of time in which you should be thinking and preparing for retirement.
By starting to save now for retirement you will have the number one financial tool working for you—time. Starting early allows compound interest to do its thing and grow your retirement savings exponentially.
Make sure you are contributing to your employer retirement plan and if possible open an outside savings account such as an IRA or Roth IRA. Keep track of your retirement accounts and make sure you are not paying too much in fees.
Insurance is often an overlooked component of a secure financial future, but it is necessary especially for those of us who are not independently wealthy. There are a number of different types of insurance you should invest in, but the major two are health insurance and life insurance.
Health costs can add up and seem to be rising daily. Insurance is meant to help out with these costs. No one plans on getting sick or injured but health insurance is there in case you do.
Life insurance is also important for those who have a family that depend on their income. Life insurance can help your family financially in the event of your death. The benefits from a life insurance policy can help pay off a mortgage, pay for your child’s college expenses, cover daily expenses, go toward funeral costs and more.
Pay Down Debt
It is difficult to ensure one’s financial future if you are not paying down your debt. This includes both secure and unsecured debt. You can work toward paying down high interest debt, like from credit cards, while contributing a small amount to setting up your emergency fund. Once your debt is paid off, put that amount each month toward fattening your emergency fund and retirement accounts.
It is also important to focus on paying off other forms of debt such as student loan debt, mortgages, car loans and more. Making sure you are paying down your debt not only helps to free up your money for other forms of savings, but it also works to raise your credit score. A healthy credit score is always beneficial for a secure financial future.
It is imperative to not only set these goals but to keep up these habits. Regularly re-evaluate your long term financial plans to make sure you are doing all you can to meet them.
If you feel you can be saving more for your emergency fund, do so. If you have more debt than you are comfortable with, pay it down. If you are unsure about your retirement savings, review your accounts, and if necessary speak with a financial advisor to figure out how to get the most out of your money.
Photo Credit: Isaac Torrontera