If you woke up one day in your forties and realised that you don’t have emergency funds to access in the event of a crisis, how would you feel? We’re pretty certain that it won’t be happiness, that’s for sure!
This mainly occurs when you have not saved much during your earlier years. There is no specific time to start saving but it is recommended to start early so that you can enjoy the luxury of living the same quality of life, even during your retirement.
So, with that being said, it makes sense to start saving now.
If you want to live a financially secured life, now’s the time to make some changes. Don’t worry, the point of this article is not to scare the living daylights out of you, but to provide you with an alternative path.
Here are some simple steps that you can follow for a secured financial future:
Step#1: Develop a marketable skill
You probably won’t be the first person to not like their first job and you definitely won’t be the last. But, if financial security is what you are aiming for, you should be familiar with the fact that your main focus is your career, not your current job.
It’s a marathon, not a sprint.
Irrespective of what your job profile and designation is, you must look to learn everything related to and around your work. At a later point you can determine what you want to do and what you definitely don’t want to do in your career.
For example, you might be working as a receptionist but gaining basic knowledge on MS word, Excel, and how to draft a professional email. In fact, it can be helpful to you in the long run as your career progresses, so remember to always think of the bigger picture.
On the other hand, if you are a writer, you can seek permission from top management and manage your company page by providing some of your own input. You can also be a freelance writer as it will provide you with an additional income and will help you build a good list of contacts.
Step#2: Estimate Budget
When you have a specific budget in place, you can eliminate any risk of over-spending and spend only on essential purchases.
Take this example.
Consider that you have to cook breakfast for your family, and the only item on your menu is sandwiches. You will need to buy bread for that, but how big a loaf will you need? If you know how many members are going to be participating in the meal and what their food consumption habits are, it will be easier for you to determine how much bread you would need for the meal.
Similarly, by creating an estimate budget, you set apart your needs from your desires. You can simply prepare a list of your daily expenses, monthly payments etc. This will bring to your notice if/when you are making any unnecessary purchases.
Step#3: Prepare a debt re-payment plan
Most young adults have some type of debt that needs to be repaid. Delay in payment of debts can cost you more in the long run because of higher interest rates. This delay may also have an adverse effect on your credit score.
If you have a student loan to repay, make sure that you have an effective plan to pay it off. Think of repaying it within the first ten years of your career as it would be easier than paying it off in your late forties when you have more responsibilities.
If you have credit card debt then prepare a plan to pay it off soon. Execute a plan that works according to your budget yet minimises your debts. You can start the repayment of debts in descending order of cards that charge the highest interest rates.
You can always opt for education finance in order to financially secure your education. Some P2P lenders offer funds at comparatively lower rates than banks, which means that the amount of debt you rack up is lower.
Step#4: Emergency fund and Insurance
As a grown-up individual, you are solely responsible for yourself and your belongings. This means that you are liable to deal with the consequences if something happens to your home or property.
In order to safeguard them, you need insurance. This insurance can protect you from any damage, theft or burglary. It can save you from shelling thousands of pounds during an emergency situation.
There are different kinds of insurance premiums that you can take out, including health, home, car, phone and phone. Some companies also offer insurance for rented homes.
Make sure that you pick an insurance scheme that fits within your budget and offers you the necessary safety when needed.
Insurance may or may not help you in the time of crisis but an emergency fund will definitely come to your aid. The best way to set up some emergency funds is by saving at least six months worth of your yearly earnings in a savings account.
Step#5: Save for retirement
There is a long way to retirement but it is equally important to start saving early and to not leave it too late. It is wise to save for retirement while you are still earning.
You may be hesitant initially to make an add-on deduction but it will be helpful for you in the long run. Make the sacrifices now to protect your future.
Step#6: Build a credit history
Your credit history has ability to break or make your future financial goals. If you have unpaid debts like an educational loan or a house loan, etc. then your credit history will take a hit. This has a direct impact on your credit score, which means that you probably will have a poor credit score.
This reduces your chances of acquiring any further loans. On the other hand, a good credit score offers you benefits like lower rates of interest on loans, concession in rent, etc.
It is important to pay all your bills on time, pay off your loans on time and earn a good credit score. Whilst it can be difficult to juggle all three at ones, it is possible with some careful planning and consideration.
Step#7: Sort your documents
Being an adult involves shouldering a lot of responsibilities and taking care of all your documents is one such responsibility. These documents include your birth certificate, passport and other official IDs. It is important to keep them at a secure spot and file them in an organised manner.
Apart from these, it is also essential to keep all your banking and investment account details at a secured place, so that they do not land in the wrong hands.
With most of the payments and allied tasks being done online, it is important to remember your email ID and password for each account.
Possibly acquire details from your parents if they have invested for you in some bonds, savings account or any other account. Also, make sure that someone you trust is aware about the safe spot and necessary details needed to access it.
Step#8: Quit a joint account
Your parents might have wanted to provide you with some financial safety by offering a joint account or an additional account. If you really wish to be financially independent, avoid using that account and try get things done yourself.
This will help you manage your expenses and map out a plan for a secured financial future.