What does financial security mean to you? Is it the ability to pay your bills on time without worry? The ability to pay unexpected bills by tapping into a savings account rather than resorting to indebtedness? Or knowing that if you lost your job for a while, everything would be fine?
Financial security can mean different things to different people, but you should know that 71% of Americans today feel safe financially, according to the 2019 Planning & Progress study from Northwestern Mutual. In fact, 73% of Americans aged 35 and over participating in the study report that their financial situation is better than 10 years ago, while 74% are more frugal and less indebted. If you do not feel safe in your finances, here are some steps to change that.
1. Master your money
It's hard to feel good about your finances when you do not know where your money is going, month after month. To remedy this, start using a budget. To set one up, list your recurring monthly expenses, consider the annual costs you know, and see how your total expenses compare to your income. If you spend all your salary or worse, spend more On a regular basis compared to what you bring home, you will need to start cutting back on your expenses. And having this budget will help you choose which bills to reduce.
2. Build emergency savings
If you want to avoid worrying about your money, having it at the bank is a good place to start. Aim for emergency savings to cover three to six months of the cost of living essentials. So if you lose your job or encounter a series of unplanned bills, you'll have a way to cover your expenses without having to go into debt. Where will this emergency fund come from? Once you start reducing your budget costs, you can use your savings to implement this safety net. Another option: get a temporary job and use your extra income to build cash reserves.
3. Define your long-term goals
Just having a financial plan could help you feel safer. If you do not have one, create one yourself or with the help of a financial advisor. When deciding how to proceed, remember that you do not have to be rich to work with a professional. Your plan may include things such as when and where you want to retire, the goals you have for your children (for example, paying for college degrees), and even the progress of your career.
4. Get the right insurance
One last way to introduce a good dose of financial security into your world is to make sure you are properly insured. For example, if your health insurance leaves you with too many deficiencies for your comfort, look for a new plan. Similarly, life insurance is a good way to offer protection to your loved ones, while long term care insurance could help you avoid redhibitory expenses during your old age. A financial advisor could help you determine the amount of insurance to buy in different categories – another good reason to hire one.
Do not let money stop you from sleeping at night. Take these steps to ensure your financial security and enjoy the peace of mind that accompanies it.