Financial security doesn’t necessarily refer to the password protection of an online bank account. Having financial security means that a person has the funds to easily maintain their current lifestyle. They never have to worry about whether they can make the next bill payment, and they don’t wait desperately for their next paycheck to come through.
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A financially secure person can also deal with unplanned expenses without much worry. The expenses won’t disrupt their monthly budget or impact their ability to make ends meet. They have enough safeguards in place to handle the problem quickly.
How can you upgrade your financial security this year? Try to implement the following financial safeguards:
A Budget
One of the easiest ways to improve your financial security is to start implementing a household budget. A budget will help you manage your monthly expenses, track your spending and achieve your savings goals. If you don’t have a clear and concise budget in the works, you should download one of the top budgeting tools available and use it right away.
Available Credit
Another way to improve your financial security is to have plenty of credit available. You can use credit to cover urgent expenses that don’t fit within your budget and then manage the repayments at a later date when you have the savings.
How can you make sure that you have available credit? Focus on maintaining a low credit utilization ratio so that your outstanding balance is nowhere close to the set limit. Ideally, your balances should be close to the bottom as much as possible. Don’t overload your accounts with too many transactions and pay your bills on time and in full.
You should also consider increasing your available credit. How? Ask your credit card provider whether you can raise your credit limit. If they approve, you will now have a lower credit utilization ratio and more credit to work with.
You can also get another credit tool. Go to a website like CreditFresh and apply for a personal line of credit. A personal line of credit is an open-end credit tool that allows you to withdraw funds within your limit and then deposit them into your bank account. Similar to a credit card, you can pay down the balance to replenish your available credit and then use it all over again. Make sure to only use this financial tool in times of emergency, and only when you can afford to pay off what you owe.
An Emergency Fund
An emergency fund is a stash of savings that exists solely for urgent, unplanned expenses. Ideally, you should aspire to have at least $1000 of emergency savings in a separate account. You can dip into this account when you experience a small surprise expense like a plumbing repair or appliance replacement.
Once you reach that $1000 savings goal, you should continue adding money into the fund. Try to get three to six months’ worth of your household income saved. This would be enough to supplement your income during major life upheavals, like job loss or illness. You could maintain your financial security in these difficult times.
Financial security doesn’t mean that you’ll never have to deal with an expensive problem. It means that expensive problems won’t send you into a complete tailspin. You’ll pay for them and move on.
The goal of the CompleteMarkets editor is to bring valuable content to the CompleteMarkets members. Providing content to insurance professionals to enhance their sales process, increase revenue streams, understand their clients and provide value to their agency.