Essential Keys to Financial
Security
Saving for the future is important but most people don’t know what to do beyond opening a basic savings account. The savings accounts found at most banks offer a very low rate and not much of a return on your investment. In order to build long term financial security, it is necessary to move beyond the basics and employ some tactics that will help in establishing long term financial stability.
The first key to financial security is ensuring that you are protected from liabilities through insurance. Young families in particular tend to be extremely under protected in these areas. It is vital to establish these protections is the forms of medical insurance, life insurance, renter’s or homeowner’s insurance and disability. Although paying these premiums each month when you are young and healthy may seem wasteful, it is impossible to predict the future. For this reason, it is of utmost importance to plan for the future. In the event of a tragedy or misfortune, lack of insurance could cause an instant depletion in savings and emergency funds.
In addition to establishing sufficient insurance, another essential key to secure finances is investing conservatively for a well rounded portfolio. Instead of placing all your investments in one localized area, make sure your portfolio is diversified and includes different types of stocks, bonds and mutual funds. Stay away from Initial public offerings (IPO’s) and highly volatile stocks. Instead, make use of dollar cost averages to invest in the market whether it is up, down or mediocre.
Another essential to financial security is borrowing as little as possible. The best loans to take out are on major investments which appreciate in value such as a home. Stay away from excessive credit card usage by paying for everything in cash instead of carrying large balances with pricey interest rates. Plan ahead for major purchases by having dedicated savings accounts for them Putting aside a little money at a time towards a major purchase may take longer but saving on fees and payments will be a better financial choice.
The last essential key is to pay yourself first by setting aside at least ten percent of your income towards investing and saving. Often people say that they do not have enough left over after paying bills to save for the future. Several banks such as ING offer automatic scheduled deductions from a checking account. This is an excellent option to take advantage of as it makes saving seem like just another checking account purchase that you don’t have to be mindful of each month.
These are a few of the essential keys to creating an optimal financial future. Protecting your family from possible financial emergencies through insurance, investing consistently and conservatively, and making the choice to avoid credit card usage are some of the main essential keys to financial security. Often making a conscious decision towards changing your future can be just the motivation needed to get on track towards financial security.
