Do you ever find yourself consistently running out of money before your next paycheck? Or maybe you're covering your expenses, but you can't seem to save. Even if neither of these things are true, you might be struggling to reach your financial goals. The tips below provide some smart options that can help you strengthen your financial situation and, in turn, your life.
Flex Your Savings Muscle
The best way to save money is to automate savings as much as possible. If you never really see the money, it's much easier to avoid spending it. The first thing that you need to save for is an emergency fund if you don't already have one. How much you need to have in this fund varies depending on your personal situation. If you're a freelancer with a family to support, savings that will cover a year of expenses is probably a good idea. If you're single and have a reasonably stable job, you're probably good with three to six months’ worth of savings.
Most banks can automatically divert part of your direct deposit into a savings account. This is a painless way to build up your emergency fund. Once you have your fund, you can continue saving for additional things such as a vacation or a deposit on a house, using the same method. In addition, if your company offers a retirement plan, you should be contributing the maximum to it, especially if the company matches the funds. Most companies will do this as an automatic deduction from your paycheck.
Stretching Your Buying Power
You may have heard that it's a bad idea to build up consumer debt. While this may be true when it comes to discretionary spending, it's not always such a good idea when it comes to things that you genuinely need. A car repair that you keep putting off can quickly turn into a much bigger and more expensive problem. Another area where this can occur is with dental issues. A toothache or a cracked tooth can become a pricey emergency if you don't get it treated early.
Unfortunately, dental care can be expensive, and your health insurance policy might not include dental. For these types of situations, you can look to payment plans. You can ask your practice for their unique link to an application for a payment plan that operates like loans for dental work. This allows you to get treated now rather than having to wait until you're facing an emergency. You can pay in installments each month.
Get Strong Through Investing
Building up savings and having a plan for when there's something you need that you don't have the cash on hand for is important, but you'll really come into your own financially when you start investing. This doesn't mean you have to focus on stock market returns and fret over your portfolio. In fact, for most, leaving your money wherever you place it is usually the best strategy. It can be hard to predict the market, but over time, the earning trajectory for low risk and moderate risk investments tends to be upwards.
Consider how much you have and what you want to do with it. You need to be able to have quick access to your emergency fund, so that needs to be a liquid investment, such as a savings or money market account. These tend to offer low interest rates, but you can get to your money immediately. However, if you're putting away money for a specific goal that's a few months or years away, such a vacation or a house, a certificate of deposit can offer slightly higher interest rates for a fixed time along with plenty of security.
As for additional investing, mutual funds can be a smart way for a novice to spread their money across several different options. Whatever type of investing you want to do, you can set up an account online and have a robo-advisor help you decide how to invest your money. If you prefer, you can work with a human instead. A financial advisor can help you choose and manage your investments.
Build Your Protective Core
In the same way that building core muscles in your body protects you from injury, you also need to build a protective core around your finances. There are a few different aspects to this, and what you need varies based on your current situation. However, for most, the two most important elements of this will be insurance and estate planning. If you're on your own for the first time and renting a place, renters’ insurance may be all that you need.
It's usually affordable and can offer protection from loss of personal property. If you own a home and have a family, things get more complicated. Make sure that your homeowners policy offers sufficient coverage for the most likely events. In addition, if you have dependents, you may want to consider a life insurance policy.
Estate planning is not just for the elderly. One aspect of it can be appointing someone to manage your finances if you're unable to do so. Even if you're young and healthy, you could have an accident that leaves you unable to manage your bills for a few weeks. This planning can ensure that someone can step in.
At the other end of the spectrum is those who have built substantial estates. It's not unusual for these people to do as little estate planning as people with much less, so if you're in this category, you shouldn't feel badly about it. However, it is important for you to get an estate plan in place. You probably have a complicated financial life, and you need to make sure there is someone who can manage that if you're even temporarily incapacitated for some reason. Estate planning is also important to protect your loved ones and your legacy and to make sure that the assets you've built up are distributed according to your wishes.
