AD* | We all want financial security. We want to know that we’re ready to handle little and large emergencies, the sudden costs, and the uncertainty of the future, at least as far as our money is concerned. However, a lot of people make the mistake of believing that becoming financially secure is all about the income you earn from your job. Here are some handy ways you can start building up your own financial security now, regardless of how much money you make.
It’s a Matter of Habit
Aiming for a goal is important as financial security isn’t all about one strategy, technique or investment. Any single-minded schemes are destined to fail. Instead, it’s about getting into the mindset of active participation towards your financial goals. Beginning with the little habits that are holding you back is a good place to start. For instance, taking the time to analyse your spending habits, recognising impulse purchases, and cutting down on the little extras you buy here and there when you really shouldn’t can help you immediately find significant savings for things like the emergency fund or extra payments to whittle down your debt. Besides the big strategies, you have to make the little changes that make those large steps all the easier to take.
It’s Something You Plan
Of course, that’s not to say that you should be without a plan at all. Curbing your unhelpful impulses is all about making it easier to stick to those plans. First of all, everyone should start budgeting their money, but few truly do. With money planning apps widely available, often for free, it’s a lot easier to create a budget. Figure out how much you have to set aside for core expenses, such as rent, groceries, bills, and so on. Give yourself a cut for optional and luxury expenses, since saving isn’t easy when you’re constantly being tempted by the things you deny yourself. The important part, however, is that you set aside a portion of the budget that’s dedicated to your financial goals, such as building up a mortgage deposit or building an emergency fund. An easy rule of thumb is to try to make this portion around 20% of the whole budget, but that can be adjusted according to your needs.
Your Borrowing Power
Many of life’s biggest investments, such as a home, car, rental property, or even starting a business, begin with a loan. If you have no credit history, however, it’s very hard to get any kind of loan, never mind one that can get you a home. Look at guarantor loan comparisons, beginner credit cards, and other tools that can help you start building a credit history. Make sure that you can reliably afford to pay back any lines of credit you open, little and large. It’s not just the amount that you borrowed that you have to pay back. You have to apply the interest and APR on top of it and understand what your monthly payments are going to look like to make sure you can fit it into your budget.
The Protection You Purchase
If you’re making big purchases, you have to make sure they’re protected. Otherwise, if something goes wrong, that’s essentially your money down the drain. You can insure just about everything you own, from the mandatory (like your car) to everything in your home, which can be covered by contents insurance. Put together a list of all your most valuable items or assets and figure out which haven’t been insured yet. Those are the first things that you need to start protecting.
Your Own Safety Nets
Insurance will help you build a safety net to save you from the costs of having to replace some of your most valuable assets all by yourself. However, you might not be able to afford to insure absolutely everything, including your own ability to work. If you’re put out of work, whether by layoffs or injury, can you afford to go for months without pay? If you’re like most people, the answer is “no.” This is why you need to start building an emergency fund by using money-saving apps to find more savings. This fund should cover three-to-five months of your entire budget. Of course, if you can create an emergency budget to scale back your expenses when you’re in trouble, you can stretch this fund even further.
Financial Freedom
There are other ways to support yourself a little more when your income falls or fails for any reason. A long-term aim for anyone looking to become financially secure is to rely a little less on their career. The best way to do this is by finding passive income streams. This includes things like investments with dividends, buying a rental property, or even starting a blog with an affiliates program that pays you for work you can do on the side. Your career may always be your main source of income, but with passive income strategies, you can have a little financial freedom so you’re not completely bereft if you’re unable to work.
Plan for the Future
Your long-term goals are the biggest, which is why you should start planning for them now. A lot of people put off contributing to retirement savings and investments, believing that they have plenty of time and will be able to progress more easily if they wait until they’re earning more. However, that only means years of missing out on the potential growth of investments you could be making now. Compare investment opportunities for those with little money and low income. Besides the fact that you’re putting money away instead of spending it frivolously, you are capitalising on the growth that it will make throughout the years.
Working on your career and improving your income is a good strategy for making financial security much easier to achieve. However, even if you grow your income, without the strategies above, it’s all too easy for your expenses to grow alongside it, and for that peace of mind to be just as far away.
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