Being financially secure is a something everyone wants, as it is a universal desire. For many, it is not only being financially secure in the present, but also financially secure in the future. Even though thinking longterm about financial security can be stressful, it is a wise idea to begin saving for the future in the present. When it comes time to retire, you will be thankful you started saving when you did, as it means you can retire earlier with less worry about your financial situation.
While money always tends to be an overwhelming subject, achieving financial security can easily be done by undertaking a few calculated practices. Here are 5 tips to achieving financial security:
If possible, begin saving for the future right now. Regardless of whether or retirement is 40 years away or 5 years away, saving money into a retirement fund or speaking with a financial advisor about retirement planning can help you begin to cover your future expenses. What you put in monthly into a retirement fund does not necessarily need to be a lot of money. Saving $100 each month at a high interest rate over the course of 30 or 40 years translates into a lot of money.
For both a retirement fund and a savings fund, consider making savings automatic. Many banks allow their clients to allocate a certain amount of money each month from their paychecks to be directly deposited into their savings accounts, IRAs, etc. By doing this, you are, in essence, forcing yourself to save money. By treating your savings and retirements accounts like an expense, you will grow into the habit of saving money. Without an automated system, many people tend to spend what could be put into savings on other expenses, many of which are not necessary expenses.
Live Below Your Means
Regardless of how well off you are, it is a smart idea to live below your means. Instead of spending every last penny of your paycheck, try to live on a strict budget. Of course, having fun and spending money every now and again is fine, as you did work hard for what you earned. However, living on a strict budget will help you continue to save more, thus offering you more financial security.
Debt and Loans
If you have any existing debt or loans out, do your best to pay them off as quickly as possible. Student loan debt or credit card debt can easily accumulate, as accrued interest can add up quickly. When it comes to paying down debt, there are a few strategies financial planners recommend. Two of the most common strategies are either paying off the largest debts first, for they often accrue the most interest, or paying the smaller ones off first, as you can slowly eliminate the different loan companies you are paying.
For those who have student loans, it can be easy to defer them until a later date. Whether you are deferring because you are back in school or deferring based on your income, deferred loans still accrue interest. While you might think you are doing yourself a favor by putting the loan payments off until you have a larger salary, you are actually accumulating more debt. Because interest rates are high, that debt amount can significantly rise with each passing year. Even if it is expensive, paying it off as soon as possible will free you from having to pay more in the long run.
It is a smart idea to reassess your financial profile annually. Finances can change drastically over the course of a year, which can change your situation. If you received a promotion, changed jobs, changed banks, got married, divorced, etc., your financial situation is quite a bit different than what it was previously. With each change you should make adjustments to your financial profile, such as determining whether or not to increase or decrease how much you save.
Achieving financial security is not something that happens overnight. With careful planning, the right investments, and making the proper financial changes, you can start laying the foundation for a secure financial future.