5 Ways to Protect Yourself Financially
No matter who you are, it is important to have certain measures in place to protect yourself (and your family) financially. Why? Because life has a way of throwing curve balls at us when we least expect them and certainly when they’re not wanted. To make sure you’re able to make lemonade out of the lemons that can sometimes show up unannounced, follow these five tips below and get some much needed peace of mind:
1. Establish an Emergency Fund
Emergency funds (also called Rainy Day Funds) are those funds tucked away in case of an emergency. As a general rule of thumb, it is wise to have at least three to six months of your income saved in an emergency fund. This way, should you find yourself out of work or otherwise down on your luck, you will still be able to meet your financial obligations and stay afloat in the meantime without relying on a high interest loan like a credit car.
Saving money for an Emergency fund is certainly less fun than online shopping or nights out with friends, but I can assure you that the stress of not having money when you most need it is even less fun. If you don’t currently have any emergency savings, don’t fret…start now!
Open a savings account at your local bank and begin depositing money each week. Your first goal should be to have $1,000 saved and build to 3-6 months of your income from there. An easy way to reach this goal is to have money automatically deducted from your bank account and transferred to your savings after your paycheck hits.
2. Get life insurance
The concept of insurance may seem like something you could not possibly need when you are young, but unfortunately, that’s not the case. Health insurance, renter’s insurance, car insurance …all of these things come with fees attached, but are absolutely worth your while. Protecting yourself is so important – in the case of an emergency, you don’t want to be unable to seek medical attention (or hit with a huge debilitating medical bill!).
Life insurance is one of the more important types of insurance to have, particularly if you have a home and children. Without life insurance, your family could be left with more than a giant, gaping void in their lives should the unimaginable happen to you. Most families know to purchase life insurance for the working spouse, but not all families purchase insurance for the SAHM. If something were to happen to you, how would your family be able to continue? When you purchase life insurance, consider all of the costs you would need to include in order to maintain the same quality of life that you have now: the daily duties, child care expenses, household maintenance, etc. Life insurance is the key to ensuring your family is protected and you, in turn, can achieve greater peace of mind.
How much life insurance should you buy? A good starting place is a 30 year term $1 million dollar policy. We are happy to run an analysis for your exact amount needed.
3. Set up a will
If you have children or a dependent, you may find yourself in need of a will. Why? In the case of something happening to you, a will is designed to serve as your legal way to ensure your wishes are honored. If you have had this item on your “to-do” list for quite some time, make a goal to cross this item off of the list this next week.
In addition to a will we suggest a guardianship form for young children, medical health directive, and depending on your assets consider establishing a trust. There are fabulous estate planning attorneys in our area and we are happy to recommend a few of our favorites.
Want to get started on estate planning today? If you’re in Virginia, the Advance Directive for Health Care is a free and easy form to complete. Like all important documents, we recommend keeping a copy in your fireproof safe at home.
4. Stick to your budget
One of the best ways to ensure you sleep better at night is by establishing a budget and actually sticking to it. Sure, there may be other ways you’d like to spend your time, but if you stick to your budget, you’ll find that you will be able to course-correct potentially sabotaging behaviors before they spiral into unfortunate situations. You’ll also be able to give your money a purpose and a plan instead of it telling YOU what to do. Both of these things will give you greater peace of mind, will help you live a more purposeful life, and will be an essential part of staying prepared.
Intuit’s Mint.com is a free, easy, and secure way to start and keep track of your spending. I suggest using it consistently for 3 months to track your purchasing habits and help you establish a realistic budget for your family. Then set aside a few minutes once a week to check in and make sure you are staying on track to reach your goals.
5. Create a financial plan
Believe it or not, ignorance is not bliss when it comes to your finances. Without a concrete plan, it can be easy to feel “stuck” or confused. Having a financial plan in place to account for things such as your spending, your budget, your investments, your retirement, goals, etc. is critical if you want to make sure you are prepared. Financial plans are designed to help you feel more established and give you the tools and roadmap you need to feel confident, prepared, and fulfilled.
Let’s get started and create your plan today!