The financially unexpected happens to people every day. Whether it is an accident, illness, or job loss that occurs, there comes a time in everyone's life when they are faced with unplanned costs. Gaining financial stability ahead of time will help you eliminate the stress that frequently comes with these events, regardless of your current income and lifestyle.
– Plan for the unexpected. You might not know just what will go wrong, but by keeping an emergency fund handy, you should be able to cover most surprises. Put a little money into an easily accessible account each month, regardless of whether or not you need it. Money market accounts are great for those who might need to access their savings on little notice; at the same time, you may need to avoid long-term investments like CDs, since there can be a hefty penalty associated with early withdrawal.
– Plan for the future. When you get to retirement and are surviving on the bare minimum, it is difficult to handle new bills. Unfortunately, your golden years are when you will likely have more medical bills to pay. Rather than leave it up to fate, invest your money now to ensure a comfortable retirement. You and your financial advisor should work together to determine when you want to retire and how much you'd like to have when that happens. From there, you can build a portfolio that will get you as close to those results as possible.
– Do not spend it all. Bonuses and raises are one of the great perks of life, and most people promptly spend them. However, if you can withstand the urge to buy yourself something special and put that extra cash directly into mutual funds, stocks, or even savings, you will not regret it. Multiplying the money you earn will pay off in the long run, whether you need to use it for a down payment on a home, a college education for your kids, or retirement.
– Keep track of everything. The main reason we find that there is no money at the end of the month is simply because we do not track it all. When possible, pay with cash. This makes it easier to keep an eye on how you are spending and reduces the possibility of credit card debt. Then make sure that you write everything down. Go over your spending each week and again at the end of the month. You will be surprised at where you can cut back.
– Diversify your portfolio. This is one of those things that always rolls of the tongue during financial conversations, but it has real merit, too. You do not want to invest too heavily in any one area; for example, funneling all your money into a 401 (k) and IRA for retirement is smart, unless you're going to need to tap into that money before you're ready to call it quits. Relying solely on high-risk stocks may make you some big money fast, but it will not sustain you over the long term like bonds or CDs.
No matter how much money you have tucked away right now, the truth is that financial stability does not just happen on its own. You need to be proactive in making sure that you have security for today, tomorrow, and twenty years from now. Planning ahead is not just about saving money; it also involves smart investing and finding ways to maximize profits without sacrificing your lifestyle.