Protecting your family doesn’t end when you do. When you’re gone, who will protect them then?
By practicing careful financial planning now, you will. There are steps you can take now to achieve financial security for you and your family.
This guide will help you secure your present, your future, and the future of your loved ones after you. Follow these steps to secure your finances and protect your family.
Prepare For Retirement Right Now
If you’re working, and you haven’t started a retirement fund, you must start one right now.
Think about it this way. How do you have money to pay the bills today? You work for it.
Now fast forward. How are you going to pay the bills 40 years from now?
Are you planning on working still? Or will you try to live off your kids? Without a retirement fund, there aren’t many other options.
This is such an obvious concept it’s mindboggling how often it’s forgotten. It’s also the most certain of ways to secure, or doom, your financial future.
Besides, most employers match your contributions to your 401k. There is no sense and no excuse for not preparing for retirement age.
Yes You Can
Hey, we said no excuses! Although, a common one is, “But I’m already living paycheck-to-paycheck and barely keeping afloat.”
Nonsense! That’s just the financial habits you’ve settled into talking.
Let’s try another illustration. What if we agreed to pay you one million dollars if you could pay all your bills next month plus raise an extra $100 dollars?
You’d do it, wouldn’t you? Of course you’d find a way to raise the $100! And that means, there is a way.
Sometimes, when we settle into our routine, we forget what we’re capable of. If one million dollars was at stake, you’d find a way to raise 100.
You’d give up coffee, quit monthly services you don’t really need, sell unneeded junk on eBay, etc. If you really look deep at your expenses, you’ll find $100 you could cut out if it meant a million dollar prize.
But right now, there’s something better than $1,000,000 at stake: financial security. The $100 you actually raise each month will go to the future-securing options on this list.
Like saving for retirement, there’s no reason not to have life insurance. Not being insured when your time comes means kicking your family when they’re down. They not only lose you but have to pay thousands of dollars for it in funeral expenses.
The cheapest life insurance you can afford will at least give them some help when the time comes.
The same goes for all insurance. Auto, homeowners or renters, and disability insurance should all be taken, just in case.
Start an Emergency Fund
While your retirement fund prepares you for the distant future, decades from now, it’s not much help for financial setbacks that may strike in the next few months. For that, you’ll need to pull from your emergency fund, if you have one.
If you don’t have one, you can’t pay. And a small setback you can’t pay means late fees, unpaid bills, more late fees, foreclosure, bankruptcy!
This is exactly why “paycheck-to-paycheck” is less an excuse and more a blaring warning alarm that something must be done. If your paycheck only covers your bills, what will you do if you get a flat tire? What if your house floods or your child has to go to the hospital?
The fact is, an emergency fund isn’t even an option because unplanned expenses are unavoidable and absolutely certain. Your only options are to save for them now or be stuck with a sudden expense later and no way to pay for it.
Really, growing an emergency fund doesn’t even count as saving. You’re actually paying early for things that haven’t happened yet via a well-planned, comfortable payment plan.
Start a Savings “Bill”
Usually, if people aren’t saving, it’s for the same reason they aren’t raising $100 extra dollars a month. We get used to not saving and then that’s just what we do.
It’s much easier deciding whether or not to pay bills than it is deciding whether to save. A bill is money that rightfully belongs to someone else for their services, someone who will make terrible things happen to us if we don’t pay. In other words, someone has already done the hard work of motivating us to pay.
But saving is up to us. No one is holding us accountable to that choice so, often, we don’t bother with it.
And that means there’s some good news: it all depends on your mindset.
If we asked you to save 10% of your income, you’d say, “No.” But if your internet bill, phone bill, and rent increased to total that same amount, you’d find a way to pay it. It follows, then, that if we treat saving like a bill, we’d actually pay it.
So, create a savings “bill” that you “owe” to your future self. Come up with a set amount and a monthly due date. Treat it as non-negotiable.
Using the savings mindset/methods above, you should have enough to put a little towards retirement and start building an emergency fund. However, as you’ve surely noticed, this will require living below your means and/or working harder for a while. But if you keep at this diligently, it will (literally) pay off eventually and result in financial freedom and a more comfortable lifestyle.
First, your emergency fund will allow you to pay any unexpected expenses without getting behind on your bills. Over time, the money you save not paying late fees adds up, and you’ll end up with more than enough in your emergency fund. Then, you aren’t just caught up on your bills, you’re ahead.
And that means, as long as you don’t have any unpaid debts, you are officially financially free. You can loosen the purse strings a little and enjoy a bit more luxury.
Pay Off Debt
However, if you do have unpaid debt, you still have a bit more saving to do. When you reach the point above where you have excess savings, it’s time to start putting that excess toward any unpaid debts.
The somewhat riskier alternative is to pay off debt before building an emergency fund. This isn’t as smart, though, because it means putting any emergency bills back on your high-interest cards. It’s better to save first, then pay off debt as follows.
Starting with the highest interest debt you owe, pay any excess toward it until it is paid off. Then, put the excess savings, along with the monthly amount you were paying toward the first debt, toward your second-highest-interest debt.
Repeat this until all debts are paid. Then, all money that’s not for bills is yours for whatever you want! Well, actually, there’s one more thing you should do first.
Save For Fun!
Once you’re debt-free, spend just a couple extra months living below your means. Pay the full monthly amount you were paying toward debts into a savings account instead.
Now, you should have enough to borrow from yourself if you need/want to. You are now your own lender and this savings account is your new, interest-free line of credit.
Sorry to sound like a cheesy infomercial here but, “Wait, there’s more!” You’ll actually want to keep borrowing because it builds up your credit score. And now you have the means to do it right.
Choose your favorite rewards-earning, no annual fee credit card and apply. Use this card for big purchases/bills to earn rewards.
But only charge amounts you can immediately pay back from savings. Then, pay it off that same day.
This lengthens your track record of excellent borrowing activity. And that’s building credit.
Get Experienced Help
Lastly, consult an expert. Your financial situation is unique, and an experienced financial planner will give you the best insight on it. They’ll hammer out the specifics and hand you the exact, personalized plan for how you can achieve financial security for your family.
Click here to learn more about getting help from a financial expert.
Achieve Financial Security For Your Family
Success is achievable. Follow these steps, do your best, and protect your family. Use this guide to reach financial security, for you and those after you.
For more financial advice, read How to Save for a House: Your Guide to Investing, Saving, and Adulting.