In a recent survey conducted by Personal Capital, the average amount of money that Americans said they would need to have in order to feel financially secure was around $516,000.
More than 20% of those asked said they would need to have a million dollars in savings to feel secure.
These may seem like ridiculously large sums of money but with inflation at an all-time high and utility costs rising every month, this kind of money doesn’t mean nearly as much as it used to.
Financial security is essential to a more stress-free and enjoyable life and retirement. However, financial security is becoming more challenging, especially as the cost of living keeps rising.
No one in the world doesn’t dream of having enough money coming in each month or year to cover their living costs, save for emergencies, and have enough left over for vacations without worrying about running out.
So, if you’re struggling to get ahead, keep reading to learn our top ten tips for achieving financial security and stepping towards improving your life.
In this article, we’ll cover the following sections:
- Start As Soon As Possible
- View Monthly Savings As A Bill
- Save in a Tax-Deferred Account
- Diversify Your Portfolio
- Include All Possible Costs
- Reassess Your Portfolio from Time to Time
- Pay Down Debt
- Check-In with Your Spouse
- Hire a Financial Planner
- Investing with Bitcoin
1. Start As Soon As Possible
The best time to save for the future is your first day of work. The second best time is as soon as possible. Whether that is a year after you start working, five years after you start working, ten years, or more.
Just as soon as you’re able to start saving, do it. Even if it’s just a little, occasionally, or sporadically. Every penny helps.
Just $100 a month saved over 40 years at a 5% interest rate will leave you with $144,959. With more than 80k coming just from interest. While it may not be enough, it’s nearly $150,000 more than you would have otherwise.
Even investing over short periods is worth it as you’ll always have more than you started with. So, if you need to dip into your savings to cover an emergency, you still have more money for that emergency due to the interest that accumulated.
Everyone has to start somewhere, start with your first $100, and build from there.
2. View Monthly Savings As A Bill
Saving monthly can be a real challenge. As we mentioned earlier, the cost of living is increasing and wage increases are not matching those numbers.
However, you can try and squeeze a little savings out of your paycheck each month by seeing it as a bill.
With so many things to tempt us each day consumer-wises, it’s easy to give in. The ten bucks spent here and there quickly adds up and you end the month with not much to show for the money spent.
So, whenever you get paid, transfer x amount into your savings. This should be a realistic amount that is possible for you each month and won’t leave you in financial trouble.
This amount should now be seen as paying for a bill, like any other bill, and is no longer disposable cash. Seeing it as a bill that has been paid and therefore, cannot come back, helps resist the temptation of spending on unnecessary things.
You can even set up an automatic payment with your bank so you never have to manually move and watch your money move across. Having it set up to go automatically can help you get into the mindset of it being a bill/direct debit rather than spending money.
3. Save in a Tax-Deferred Account
A tax-deferred account lets you realize immediate tax deductions up to the full amount of your contribution, although future withdrawals from the account will be taxed at your ordinary-income rate.
However, using the account will help stop impulse spending and unnecessary spending. If you are penalized for taking money out then you’re far less likely to take it out in the first place.
If you have enough disposable income then put as much as you can in a tax-deferred account each month to benefit from the tax break and the savings aspect.
4. Diversify Your Portfolio
This is an important but sometimes overlooked step. You may think it’s obvious to not put all your money into one asset. And yet, there is an endless number of people who do just this and lose everything or get an incredibly poor ROI.
You wouldn’t keep all your money in one bank account so don’t keep all your investments in one asset.
Investing in assets, while carrying a lot of risks, can have a great ROI and make a difference to your present or future living situation.
For the best chance of positive outcomes, you need to carry out proper asset allocation. Consider your financial goals and growth expectations to figure out the best asset for you to invest in. Spread your money out wisely.
5. Include All Possible Costs
When people put together their estimated expenses for the future, they often miss out important costs such as dental care, long-term medical care, income taxes, home repairs, and more.
Retiring doesn’t make life any cheaper so be realistic in the idea that not only will you have the same outgoings as before but they may even go up - medical and dental for example, will be necessary more often.
Overestimating your future expenses is far better and less stressful than underestimating them.
6. Reassess Your Portfolio from Time to Time
While long-term investments are what you’re looking for, it’s also not a good idea to put a load of money down and then not check your investment. Some people like to check their investments as rarely as possible, this then means it’s less likely they'll make panic discussions during a downturn.
However, even checking them rarely is better than never checking them at all. You need to check in and reassess what’s happening.
Change your investment if the original isn’t working out over the long term. Reassessments that are based on predicted market conditions or the world’s economic outlook.
You need to be able to analyze what’s ensuing in the world and in the market to be able to reassess and change your portfolio if needed. This will help you stay on track with your financial goals.
7. Pay Down Debt
Credit reporting agency, Equifax, offers the following advice to those torn between paying off debt or saving money.
“Our recommendation is to prioritize paying down significant debt while making small contributions to your savings. Once you've paid off your debt, you can then more aggressively build your savings by contributing the full amount you were previously paying each month toward debt.”
And we agree. Paying off debts such as credit cards, car payments, and even your mortgage can then clear the way for you to save far more efficiently in the future.
Saving a little but paying interest on debts each month does not make financial sense, especially if you have enough income for this to not be needed.
If you have a lower income, then paying off debts one at a time should come before looking at seriously investing or saving.
8. Check-In with Your Spouse
You and your spouse are a team so you must be working towards the same goal. It’s no good you putting all your spare cash to one side if they're spending all of theirs and planning to live off your income in the future.
Team goals require team efforts, so be sure to check in with one another and ensure you’re both on the right track. Make a spreadsheet to track incomes and expenses if necessary so you both have a clear picture of what’s going on and what the goals are together.
9. Hire a Financial Planner
Spending money to have someone tell you how to save money may seem counterproductive but it can be well worth it!
A qualified and experienced professional will know far more than you could reasonably learn and their advice can be invaluable. If they can help you with your financial planning and portfolio management then the money they help you save (or stop you from losing) will more than make up for their costs.
Important Points to Takeaway
While the first day of paid employment is the best time to start saving, it’s never too late to start thinking about the future
- See savings costs the same as bills so you feel more “obligated” to put money aside from each paycheck
- Tax-deferred savings accounts will limit the amount of impulse spending you can do since they have penalties for withdrawals
- Paying off debt as soon as possible will help you save more aggressively in the future
- Ensure your spouse is on the same page as you when it comes to future financial goals
- A qualified financial advisor can be worth their weight in gold if you choose the right one
The Most Frequently Asked Questions About a Financially Secure Future
How Much Money Do I Need to Be Financially Secure?
The answer will depend on a variety of factors including your location, cost of living, and expectations. As a general rule, if you can take out 4% from your investment accounts every year and never run out of money then you are considered by many to be financially secure.
What Is the Difference Between Financial Security and Financial Stability?
Being financially stable means your income more than covers your expenses, you have money left over for “fun” and a decent amount for savings.
Being financially secure means you have all that, plus money for retirement without the fear of running out of money.
How Quickly Can I Become Financially Secure?
Like with the previous question, the answer will largely depend on your income and cost of living. However, by having no debt, living within your means, saving in accounts or assets that have a reasonable ROI, then you can be well on your way in just a few years!
Investing in Bitcoin
Another way you can invest in the future is by investing in Bitcoin. However, given the large expenses involved in investing or mining for Bitcoin, many people are never able to get involved.
That’s why Mining Syndicate came along to help people invest in their future with Bitcoin without the huge costs.
We are the largest mining pool in Texas and are here to help anyone from anywhere get started with Bitcoin mining and have a better income.
Expand Your Bitcoin Horizons with Mining Syndicate
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