While figuring out whether you’re financially stable or not has a little more to do without just being able to decide if you could survive longer than paycheck to paycheck, but more has to do with an overall picture of the household finances. Handling the finances is a lot to deal with, one that should not be tackled alone, especially if you share the burden with a significant other, but even if you are single, it’s always a good idea to bring in a family member, friend, or professional in order to ensure you’re on the right financial path. Certainly, there is always room for improvement, but with a few tweaks to your current financial outlook, you can strive to be financially independent stable for now and into the future.
A Solid Emergency Fund Built UP
As sure as you can be about being on the right track when it comes to the finances, you never know what will come up out of nowhere and hit you with a bill that you were not expecting, causing you to put on your credit card and risk going into debt for months or even years, until the balance is paid off. By saving up a few months’ worth a reserve, you can give yourself a financial cushion to protect yourself from the unexpected. While it may take a while to save up that amount, avoid saving even more as those funds sitting in an account will not grow at all compared to being in a brokerage or retirement account.
Sufficient Insurance Coverage
Much like getting hit for an appliance repair will cause your budget to become out of whack, when medical bills, home damage, or an auto accident, it’s best to be prepared with the proper insurance that will provide adequate coverage in case of emergency. On top of that, whether you want your loved ones to be covered in case of your untimely death, life insurance can be arranged as well with premiums decided by your health and age.
Contributing to a Retirement Account
After you’ve spent your entire adult life working, by the time you have become of retirement age, the last thing you want to worry about is having enough to life off, let alone not being able to finally travel and enjoy every life experience without the stress of work any longer. By contributing to a retirement account early on, you’ll have more time for your funds to grow over time. It can be a large chunk of your check going towards an account that you will not need until possibly decades later on, but if you think about your long-term future, you may want to put saving for retirement more of a priority.
College Savings Account Set Up
As you begin to start a family you think about more than just your future, but of your children’s as well. While retirement can be decades away, college is under eighteen years away so it’s best to get on saving as early as you can so you can to make sure you can help with a portion of college. With several college savings plans available, even contributing a little each month will add up to at least pay for a few semesters when it comes time to head off to college.
Maximizing Free Money
Since money is likely tight by the time you pay for monthly bills, food, gas, and savings, you want to hang onto every dollar you can, so missing out on free money should always be avoided. First, using a rewards credit card where you can earn points or cashback on the items that you would normally purchase anyway is a great way to earn hundreds of dollars a year, depending on how much you spend, while making sure you’re contributing to the max contributions from your employer is a great way to earn money towards your retirement account that could add up to thousands a year or tens of thousands over the next couple decades.
In the end, it’s best to avoid paying interest of the pocket of your hard-earned income, so the more you can stay out of debt, the better. While can be tough when it comes to large purchases such as a home or car, but day to day spending from a credit card, especially with its high interest rate, should be the first to go. Mortgage rates fluctuate quite often, so taking advantage of a refinance to a lower rate is a great way to not only save money every month, but over the life of the mortgage.