Let’s face it – adulting is hard. How many times have you and your friends sat around talking about the time when you had little to no responsibility? Long before the days of mortgages, kids and car payments. The carefree days when thinking about life insurance, retirement and 401(k)s seemed light years away.
Planning for the future and life’s unexpected events can be overwhelming, but it can also be extremely beneficial. There’s a sense of financial security that comes with knowing you have a plan in place to handle the curve balls life likes to throw at you.
Create a budget
Having a budget isn’t a bad thing. Consider your budget a reflection of your priorities and values, rather than depriving yourself of the things you enjoy. Creating and keeping a monthly budget is the key to long lasting financial planning. It allows your money to work for you as you’re giving each dollar a purpose. It puts you back in control of your money.
No matter how much your income is, there’s always the potential to spend more than you make. There are several ways to set up a budget, but it ultimately comes down to what works best for you. Check out our budgeting 101 guidebook here.
Build up your emergency fund
There’s a quote that says, “The best laid plans of mice and men often go awry.”
No matter how good or solid our plans may seem, sometimes life happens and our plans are pushed to the side. What happens if your car breaks down, you have to move, or your water heater has to be replaced? Illness and employment are equally as unpredictable. If you are laid off, how long could you pay your bills without living off credit cards or borrowing money? You’re not alone. Did you know that 40 percent of Americans can’t cover a $400 expense out of pocket?
This is why an emergency fund is paramount. Completely separate from a savings account, your emergency fund is specifically designed to cover your necessary monthly expenses. Ideally, you should keep three to six months’ worth of expenses in your emergency fund at all times. Why? It covers you in the event of a layoff or medical emergency that leaves you unable to work.
Eliminate your debt
Northwestern Mutual’s 2018 Planning & Progress Study showed that the average American has about $38,000 in personal debt, excluding home mortgages. Typically, that debt is a combination of credit cards, student loans, car loans, and personal loans. Credit card debt accounted for 25% of that debt. The study further showed that 2 in 10 Americans spend anywhere from 50% to 100% of their monthly income on debt repayment.
These are staggering facts. But there is hope in those dismal numbers. Getting out of debt takes discipline, and it’s not easy. Start by paying more than the minimum payment. If you’re only making the minimum payment, you’re only paying interest and not attacking the principle. Anything over the minimum payment is applied to the principle and knocks out that balance faster.
There are many helpful methods to reduce debt, and there are several free online and mobile debt repayment tools to help you track your progress as you pay down balances. Check out our credit management and debt reduction guidebook here.
Invest in your future
It’s never too early to invest in your future. If you don’t have a retirement plan such as a 401(k), IRA or stock investments – get one.
If you already have a retirement plan, that’s awesome! Think about increasing the percentage you’re contributing. It helps you save without making an effort, allows you to take advantage of the compound interest, and it reduces your taxable income.
Financial planning is just as personalized as each member we serve at First Financial. Let us help you get your future on track, by making an appointment with our Investment and Retirement Center.* Stop by your local branch or give us a call at 732.312.1500.
*Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.