Getting your finances where you want them to be takes careful planning and ongoing work. Strategies to protect your assets will make you better able to keep your footing when you have to contend with changes in your income or expenses. Build smart habits, make judicious spending decisions, and budget thriftily to make steady progress towards your long-term goals.
Safeguard Your Resources
As you’re putting work into strengthening your finances, be sure to take the right steps to protect yourself from unexpected events that could derail your efforts. You’ve probably heard a lot of people stress the importance of being prepared for the unexpected, but how can you be prepared if you don’t really know what to expect?
In making any type of plans, you have to consider the possibility that an unexpected event could throw a wrench in them. You might not be able to foresee exactly what kind of unexpected event would hit you out of nowhere and disrupt all of your financial planning, but you can certainly anticipate that any number of major loss or liability scenarios are somewhere in the scope of foreseeability.
Maintain sufficient insurance coverage for valuable property such as your vehicle or your home. If you rent your home, a renter’s insurance policy is a practical, affordable way to protect the value of your personal belongings. A policy that offers personal liability coverage is an excellent addition to an insurance plan because it could spare you from irreparable financial harm arising out of a claim against you. This coverage might prove to be an invaluable resource in the event that you have to deal with a personal injury or legal action for property damage.
Control Monthly Spending
Living on a budget entails a lot more than just a broad directive to be cut down on unnecessary expenses. Of course, you should be making a consistent effort to rein in expenditures for things that would be best categorized as wants rather than needs. Nevertheless, this is one of the final pieces of the budgeting process. The first piece that you should focus on is identifying your key, static expenses. Itemizing all of your monthly living expenses and ongoing payment obligations will give you a really clear picture of your total need-based expenses. Compare that figure with your regular monthly revenue, and that will let you know how much you can afford to spend on want-based expenses without going over your budget.
Make it a point to look for savings opportunities on recurring expenses. You should also search for savings on the goods and services that you buy month after month. Shop competitively for internet and phone service, and get in touch with providers’ customer retention department if your rates ever go up. In addition, be more energy efficient at home to spend less on utilities. Using a smart thermostat and insulating your home could generate big savings.
If you’re working on paying down credit card debt, entering into a consolidation plan might help you pay less on interest every month. Likewise, paying down a high-interest debt with a personal loan might be a good way to stop accruing interest that prevents you from making progress tackling the principal.
Leave Room in Your Budget for Savings
In your itemization of static, essential expenses, include room for deposits to a savings account. By putting aside a little bit of money to hold in savings, you’ll have breathing room if your revenue changes abruptly. Also, a major expense that comes up suddenly such as a costly repair for your home or vehicle won’t interfere with your ability to afford all of the other fixed items that make up your budget.
Remember that putting money into a savings account isn’t the same as saving for retirement. Think of this line item of savings like more of a safety net or a rainy day fund that post-employment reserves. In fact, having liquid capital on hand in a savings account might spare you from having to withdraw money from retirement savings and derail your long-term wealth management plans.
Even if you feel like you’ve got your work cut out, staying organized can make that work more manageable. If you set clear goals and track your progress, you can continue making solid headway towards better financial health.