What does financial security mean to you? Is it the ability to pay your bills on time without worry? The option to pay unplanned bills by dipping into a savings account, rather than resorting to debt? Or the knowledge that if you were to lose your job for a period of time, you'd be OK?
Financial security can mean different things for different people, but one thing you should know is that 71% of Americans today feel financially secure, according to Northwestern Mutual's 2019 Planning & Progress Study. In fact, 73% of U.S. adults 35 and older in the study say their financial situation is better now than it was 10 years ago, while 74% are more frugal and have less debt. If you're not feeling all that secure in your finances, here are a few steps to change that.
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1. Get a handle on your money
It's hard to feel good about your finances when you have no idea where your money actually goes month after month. To remedy this, start using a budget. To set one up, list your recurring monthly expenses, factor in once-a-year costs you know about, and see how your total spending compares with your earnings. If you're spending down your entire paycheck or, worse yet, spending more on a regular basis than what you bring home, then you'll need to start cutting expenses. And having that budget will help you decide which bills to slash.
2. Build emergency savings
If you want to avoid worrying about money, having some in the bank is a good place to start. Aim to have emergency savings to cover three to six months of essential living costs. So if you lose your job or encounter a string of unplanned bills, you'll have a way to cover your expenses without resorting to debt. Where will that emergency fund come from? Once you start cutting costs in your budget, you can bank your savings to build that safety net. Another option: Get a temporary side job, and use your extra earnings to build cash reserves.
3. Map out your long-term goals
The simple act of having a financial plan could help you feel more secure. If you don't have one, map one out on your own, or with the help of a financial adviser. As you decide which way to do it, remember that you don't need to be wealthy to work with a professional. Your plan might include things like when and where you want to retire, the objectives you have for your children (like paying for their college degrees), and even career-related progress.
4. Get the right insurance
One final way to introduce a healthy dose of financial security into your world is to make sure you're adequately insured. For example, if your health insurance leaves you with too many gaps for comfort, shop around for a new plan. Similarly, life insurance is a good way to buy your loved ones some protection, while long-term-care insurance could help you avoid crippling expenses during your senior years. A financial adviser could help determine how much insurance to buy in various categories -- another good reason to hire one.
Don't let money keep you up at night. Take these steps to financial security, and enjoy the peace of mind that comes with it.
