Thanksgiving is just around the corner. It’s a time for many to reflect and be thankful for what’s important to them – family, friends, health, home…and financial security? Yes, financial security is certainly something to be thankful for if you have achieved it, and something to strive for if you’re not quite there yet. Here are a few things you can do to help you on your journey toward financial security:
1. Establish an Emergency Fund
Having an emergency fund, no matter how small or big, can be very useful. Setting aside even $500 to $1,000 can help you cover surprise expenses that life may throw at you, for example, small medical expenses or car repairs. Slowly add more money into your emergency fund so that it can grow over time. If an expense drains your emergency fund, build it up again so it’s ready for the next setback. Security comes when you feel comfortable that you can deal with the unexpected when it happens.
2. Limit Fixed Expenses
Fixed expenses include rent or mortgage, utilities, insurance, groceries, etc. Try to keep these must-have expenses in the 50 to 60 percent range of your income to increase your financial security. Spending less than what you earn is one of the most important financial concepts to understand and live by. This may take some initial lifestyle changes, but the longer you do it the easier it is to continue doing it.
3. Reduce Debt
If you have a mortgage, car loan, student loan, credit card, and/or medical bills, debt can easily get out of control before you realize what's happening. Tackling your debt takes time and effort but staying consistent can help you successfully dig your way out of debt. Try listing out all your debts from smallest to largest and pay off the smallest debt first while paying the minimum payments on everything else. When that is paid off, take what you were paying on that one and roll it to the second smallest debt and so on.
4. Invest in Your Retirement
While retirement is still far away for many people, appropriate planning is a crucial part of achieving financial security later in life. If your company offers a 401(k) or other retirement plan with matching contributions, you should try to contribute up to the employer’s match which is usually a percentage of your income. When you're young, you have time on your side. Use it! The sooner you start saving and investing for your retirement, the easier it is to turn even small amounts of money into big bucks.
With some planning and commitment to your achieving your goal, you can get to a point where you are financially secure. Begin by understanding where you are right now and set your destination. You can then make moves that will steadily bring you to a place where you don’t have to worry about money.
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