Today, we are living in uncertain times. The outspread of COVID-19 led to a worldwide lockdown followed by an economic recession. As a result, many businesses shut down, whereas others downsized, leaving millions of people unemployed. Even though the economy is returning to normal, people are still stressed about money and finances. After all, everyone is working to make ends meet, leaving no room for savings.
So, the question is how to achieve financial security. Financial security is more about reaching a point where you are stable enough to survive without debt and have sufficient savings. It is about knowing that you and your family can survive even if you lose your job. To achieve this security, you must stop living paycheck to paycheck. Instead, you have to make a few lifestyle changes.
You may begin by analyzing your expenses and income to reduce unnecessary costs. Likewise, invest and save a massive chunk of your income for dealing with financial inconveniences. If you want to learn more about this, keep reading. Here we have highlighted six tips to attain financial security.
1. Set Short-Term Goals
Truthfully, a lot can change between your 20s and 40s. May it be the loss of a job, health problems, or economic crisis since life is uncertain. Therefore, planning far into the future can seem daunting, so why not set short-term goals? Perhaps, you can plan to open your startup instead of settling for corporate slavery.
Savings might not seem enough to start a business, but you can always look for external financing. You can apply for Fast online loans by Nectar at the most affordable interest rates.
Similarly, make a goal to pay off your credit card debt within a year. You might have accumulated a massive debt over the years, but settlement is possible within 12 months. These goals might seem small, but you’ll have a better chance of achieving them. You can even write down to have a track record of your goals.
2. Assess Personal Finances
Are you financially sound at the moment? A thorough analysis and examination of your current financial situation are crucial to achieving financial security. Determine your income, expenses, assets, liabilities, and risk appetite. Knowing where you stand financially will help create the right plan. In addition, you have to assess your spending habits. At times, impulse buying behaviors can be threatening to your income.
All the extra cash with promotions or part-time jobs gets folded into that spending. Therefore, identify such habits to live on less than you make. These temporary sacrifices won’t seem a big deal once you achieve financial security. Lastly, get rid of all student loans or credit card debt at your earliest possible since they consume a massive income chunk.
3. Invest Your Income
Most people prefer saving money in their bank accounts. While it might seem safe and wise, it fails to build wealth. On your path to financial security, you must invest at least 15% of your income in different sources. You can put some money in the stock market for long-term investment and high returns. Likewise, invest in a few financial securities such as T-Bills, Commercial Deposits, and Bonds. They offer higher returns than saving accounts with minimum risk.
Besides this, you can also explore the real estate market. In addition to high rentals, the property value also appreciates, offering you substantial gains and returns. The key to investing is diversification, meaning you should never put all your eggs in one basket. Invest in different mediums to mitigate the likelihood of losses and gain lucrative returns.
4. Save For Retirement
For most people, financial security means saving for retirement, but they lose track. The early years are spent paying off student loans. Likewise, middle years are all about saving up for children’s college fees. In this chaos, we often forget about saving for retirement. The sooner you begin saving, the earlier you can retire. Hence, explore the different options available and start saving.
You can opt for 401k Plans or IRA, whichever best suits your income and saving goals. Likewise, you can also open a tax-deferred account. It will deter you from spending the saved amount as it will have tax consequences and penalties. Once you have enough saved in this account, you can also contribute to an individual retirement account (IRA).
5. Take Calculated Risks
When you are young, taking risks doesn’t seem like a problem. You might make mistakes, but you will have enough time to recover from them. However, it is essential to take calculated risks since it can be a prudent decision in the long run. For instance, you can move to a new city with better job opportunities. It is a risky move but an equally rewarding one.
Similarly, feel free to take a new job at a different company for less pay but more upward potential. You might be making less money, but career progression will offer higher monetary returns. These risks are impossible to take when you are in your mid-40s with plenty of responsibilities. Hence, taking advantage of every opportunity can make the most out of your early career years.
6. Build an Emergency Fund
How do you bear unforeseen expenses? Most people reach for their credit cards, whereas others try borrowing money from friends and family. Unfortunately, the compound interest makes it burdensome to repay, pushing you into the debt trap. In these instances, building an emergency fund can come in handy. For that, you have to set some money aside for emergencies.
It doesn’t mean you have to save a huge percentage of your income every month. Instead, keep 5%-20% aside for this fund. All in all, it should be enough to cover living expenses for three months. Remember, having some money set aside for emergencies won’t only give you peace of mind but ensures financial security.
Many people feel stressed about money and finances, but you don’t have to feel the same. Some planning and lifestyle amendments can promise years of financial security and stability. Therefore, understand your financial health, pay off debts, start a side hustle, and reduce your expenses. Likewise, explore new investment opportunities, save for retirement, and build a fund for uncertain times. These few tricks can help in fulfilling all your financial goals.