Wednesday, May 22, 2013
8 Habits of Financially Secure People
Achieving financial security has never been simple. And during an economic downturn, it’s especially hard. The following guidelines can help keep your future financial security from taking a nosedive in good economic times – and bad.
1) Scrutinize expenses
How do you spend your money? Paying close attention to cash flow, including those “small treats” you give yourself throughout the week, can have a big impact.
Those $3 cups of coffee each morning can add up quickly – costing you $780 a year!
Use our spending worksheet (PDF )
) to record all the ways you spend. Then take out a pen and start cutting.
2) Make a budget
3) Pay down debt
The benefits of wiping debt off your personal balance sheet can be huge.
A good strategy to get a handle on your credit cards is to focus on the highest-rate card first. In general, it’s best to put extra amounts toward the card with the highest rate until it’s paid off. Then move on to the card that has the next highest rate.
You should also avoid new charges and continue to pay at least the minimum amounts on your other cards.
Use our debt payoff worksheet (PDF
) to help you eliminate burdensome debt.
4) Establish an emergency fund
5) Protect your assets
In good economic times and bad, adequate protection always makes sense.
Life insurance can provide income for you family if you die.
Homeowners and auto insurance can help protect you if your home or car is damaged or destroyed – and provide liability coverage if someone is injured.
Disability insurance can provide a source of income if you’re unable to work.
6) Leave your retirement accounts alone
7) Follow an investment strategy
Investing is important for your future financial security. Don’t let a declining market tempt you to sell impulsively. You could miss out on substantial gains if you’re not invested in the market when it starts to rebound.
Instead, make sure your investment strategy is still appropriate for you. Base it on your tolerance for market risk and the amount of time before you need the money.
Appropriate asset allocation is considered the single most important aspect of investing. If it’s still right for you, stick with it!
8) Don’t go it alone!