Given our current economic climate that’s riddled with uncertainty and anxiety, it’s necessary to take stock of where you lie on the financial security spectrum.Whether you have debt or not, you should have an awareness of what constitutes financial security, and you should know how your specific situation impacts your ability to attain this type of freedom.
By following the 10 steps towards financial security below, you’ll have a great shot at getting ahead in the financial game as well as making sure you’re setting yourself (and your family) up for future financial success.
Here’s a brief overview of what I consider a great start for covering your financial bases:
Track your spending!
Do you know how much of your money comes in and where/how it goes out? If not, develop a tracking system right. this. very. minute. It can be detailed like an Excel spreadsheet broken down by category, automatic like a Mint.com account, or elementary like a crayon on a napkin. Basically, it doesn’t matter how you track as long as you’re doing it!
Create a budget
Ahh yes, the dreaded budget. All joking aside, this is one handy little nugget in anyone’s quest for financial security. Keeping a budget helps you make plans and goals and stick to those plans/goals. A budget puts you in control of your money and, really, who doesn’t like the idea of that?
For a quick reminder of the power of a good budget, check out the video below:
Build an Emergency Fund
And keep it funded! 3-6 months of living expenses should be your bare minimum goal. Once you meet that, continue funding for at least 12 months of living expenses.
Pay off ALL consumer debt
Credit card balances, HELOCs, and personal loans are not for the financially secure, no matter how you slice it. If you want something, save for it. If you fell on hard times or have previously made poor spending decisions (as I once did), NOW is the time to remedy the situation.
Max out your 401K
Or at least contribute! She/he who pays herself/himself first now is the one who enjoys a financially stress-free retirement.
Open a Roth IRA
If you can take advantage of this type of retirement account, please do so. As in, please do so yesterday. Hopefully that statement helps to highlight the importance of having a Roth IRA.
Build in some “fun” money
Budgeting isn’t all about savings, debt payoff, and retirement–it’s also about having fun! Build in a small reserve to treat yourself–whether for vacations, shopping, dining, whatever is most important to you. Building in this cushion will help you stave off burnout and feel more satisfied with your progress.
As the saying goes, if you fail to plan, you plan to fail. Set goals that work for you. They can be annual, monthly, hell, even daily! Set them and remind yourself of what they are.
Work your tail off to meet set goals
So you’ve set your goals, now what? Reach them; blow them out of the water! The satisfaction and motivation yielded from meeting your goals is a catalyst for future success–ride that wave!
Consider other steps
Obviously this list is not inclusive and will not fit everyone’s situations. Perhaps you want to open a 529, invest more, quit your job, pick up another job, or purchase investment properties. Perhaps you need to dial down your lifestyle. Or perhaps you need to fix some emotional wounds prior to being on-board with your finances. Whatever your own personal steps happen to be, define them and get to work. If you need a bit of help, there are plenty of financial resources you can seek out to help you gain momentum with your efforts.
Even if you can’t do all of this now, do what you can. You’ll be amazed at what immense progress you can make with just a little bit of effort!
What kinds of steps are you currently taking to ensure your own financial security?