We all want to create a financially secure life, for both ourselves and our families. To achieve financial stability, we must make preparations for the future. Preparing your future finances takes a considerable amount of planning. To get started on that journey today, explore these tips and finance resources.
1 . Life Insurance
When a person dies, a life insurance policy protects their loved ones, by providing financial support. The idea is to reduce the financial impact on the deceased’s family. Life insurance policies are either ‘whole-of-life’ or ‘term-of-life’. The difference is that ‘term-of-life’ involves a max term involved, whereas ‘whole-of-life lasts for the person’s entire lifetime. When you’re choosing a life insurance policy the following considerations may come in handy:
- What is the highest monthly premium that I can afford? (Remember to budget the monthly payment along with the rest of your expenses).
- Choose a policy that offers a fast payout. (Some policies require the deceased’s family to wait years until they receive a payment).
- Choose an appropriate coverage amount. (The coverage amount should reflect your lifestyle and salary).
- Set Career Goals
To improve your financial health, it’s helpful to set career goals for the future. To improve your earning potential, you’ve got to think about how you can progress. To help you move forward in your career, these starting points may be useful.
- Work with a career coach: A career coach can help you to establish your goals, and create a plan for progression.
- Get a mentor: With the help of a mentor you can learn new things, helping you to develop in your current role.
- Networking opportunities: Whether it’s online networking or in-person events, put yourself out there, to make valuable connections.
- Ask for feedback: Get feedback from your superiors and colleagues, figure out the areas you could improve.
- Retirement Plans
To prepare for your financial future, you’ll need a retirement plan. Without an appropriate plan, you struggle to pay for your lifestyle during retirement. There are lots of different retirement plans to choose from including:
- Individual Retirement Accounts: An IRA is an investment account, using this plan you can invest in bonds, stocks, and mutual funds. With an IRA you can generate tax-deferred earnings, to grow your contributions.
- 401(k): A 401(k) is a type of retirement plan offered by your employer. With a 401(k) account, you can pay in a portion of your pre-tax paycheck, to make investments. One of the great things about these accounts is that you can choose the contributions, and change them as you please.
- Reduce Your Debts
Drowning in debts makes it impossible to save. When you can’t save any money, it’s difficult to secure your financial future. To help you regain control of your debts, financial experts recommend several methods.
The ‘debt avalanche method’ is a popular debt reduction process. First, you should make the minimum payment on each outstanding debt. Next, check which debt comes with the highest interest rate, and pay any spare funds towards this debt. When you’ve paid off the highest, you start chipping away at the next highest, (and so on). According to Investopedia, the key benefit of the DA method is that ‘it minimizes the amount of interest you pay while working toward your debt-free goal.’
Another strategy is the ‘debt snowball technique’. With this method you pay off your debts in order, starting with the smallest debt, and working your way up to the highest.
CreditKarma believes that ‘the primary advantage of the snowball method is the psychological boost.’ They suggest that,‘ when you see debts disappearing, it can increase your motivation to continue paying off debt.’
- Estate Planning
Estate planning means organizing a person’s assets, in preparation for when they die.
When putting together an estate plan, attorneys will determine how the person’s assets can be preserved. The attorney will plan how the assets will be distributed and managed once the individual has passed away. Key tasks include establishing trusts, preparing the will, and organizing the funeral. An attorney can use several strategies to reduce taxes on the estate and create trusts. Estate planning sometimes involves making charitable donations.
To improve your future finances, investment opportunities are the way forward. For beginner investors, these options are a great starting point:
A robo advisor refers to an automated finance service. Individuals can use the service to make financial plans, and investments. It’s easy to get started, first you create an account, and then answer a questionnaire. The robo advisor uses your info to suggest portfolio options. If you agree to the suggestions, the advisor makes small investments on your behalf. You’ll receive regular financial reports that demonstrate your progress.
According to Nerd Wallet, ‘A market index is a selection of investments that represent a portion of the market.’ Index funds are a great investment option for beginners. These funds involve a passive technique, monitoring a market index, instead of relying on portfolio management. When you’re starting out, low-risk investment opportunities are the way forward.
- Emergency Fund
An emergency fund refers to a lump sum of money that you keep in a separate account. The idea is that you do not use any of the money unless it’s an emergency. There are many benefits to having an emergency fund, including:
- Avoid accumulating debt: If you have an emergency fund you can avoid accumulating more debt, to pay for a financial emergency.
- Avoid dipping into savings: If you’re saving for a house, it’s important to avoid dipping into your savings. With an emergency fund, you can ensure that you stick to your savings goals.
Financial Support Tools
- Clarity Money
Clarity Money is a great budgeting app, helping users to keep on top of their finances. Using the app you can track spending, manage expenses, and plan your goals. Clarity Money allows you to separate your spending into different categories, to better understand your finances. The app uses artificial intelligence, to offer budgeting suggestions, and assess your spending. With Clarity, you can monitor your savings, investments, and debts.
Mint is a leading budgeting app, the tool allows you to link your financial accounts, and review your credit score. The app helps you to design a monthly budget, using the appropriate spending categories. You can use Mint to review your investment portfolio and track your investments. Other features to check out include:
- Receive notifications when you are close to your limit.
- Track your cash flow.
- Get personalized financial insights.
- Take advantage of the bill tracker.
Acorns is an app that makes it easy for anyone to invest. The app gathers your important financial info and then helps you to make small investments. Your money is invested into a range of expert build ETF portfolios. There are plenty of benefits to using this app, such as:
- Invest for your retirement: Acorns can recommend the right retirement plans, (whether it’s Roth plans or traditional investments).
- Invest for your children: The Acorns app offers a ‘UGMA investment account for kids’.
- Smarter spending: Automatically invests a portion of your paycheck, growing your investments each month.
Digit can help you to reach your financial goals, and prepare for the future. It’s a personal finance app that helps you to pay debts, invest, budget, and save money. The app learns your financial habits and makes suggestions based on your needs. Digit assesses your income and spending patterns and establishes what you can save. One of the best features is the ‘Overdraft Prevention’, helping users to avoid fees.
- The Investing For Beginners Podcast
The Investing For Beginners Podcast will help you to learn the ropes. Here you’ll learn jargon-free tips, to get you started. These episodes discuss topics such as robo advisors, green stocks, and bitcoin. You can learn all about ‘flipping cheap land’ and ‘investing in your emergency fund.’ Each week you’ll learn something brand new. After a while, you’ll feel more confident approaching the world of investment.
- It’s Your Money
Join finance journalists Sam Broadbeck and Laura Miller, to make the very best of your finances. This podcast offers plenty of tips and advice, covering your career, retirement, taxes, and more. There are lots of tips for beginner investors, and ideas to make your money go further. Here you can get a ‘nonboring guide to insurance’, and learn about saving money on holiday. It’s Your Money has plenty of knowledge to help you improve your finances.
- Afford Anything With Paula Pant
In this podcast, you’ll consider how you spend your money and your time. According to Paula, ‘Every decision is a trade-off against another choice.’ Throughout these episodes, you’re invited to carefully think about your financial choices. Recent shows have discussed topics including, building your dream career, retiring at fifty, and smart investing. To learn all this and more, tune in to Afford Anything.
With the right knowledge and tools, preparing for the future doesn’t have to be a chore. There are plenty of options to create your future finance roadmap.