News That Matters

10 Ways to Protect Your Financial Future

Your future is everything. You may have a great job now, but are you confident that it’s going to last you the next 30 years? The next 10 years? You may have a decent amount of savings, but how long will that last you if you face a true emergency?

If you want to improve your financial standing and guard against major threats, you’ll need strategies in place to protect your financial future.

So what are the best strategies to accomplish this?

How to Protect Your Financial Future

Protect your financial future with these important moves:

1.       Set long-term goals. First, make sure you’re setting long-term goals. Many people live their entire lives only focused on the short-term; they want to pay all the bills on time this month or get through the end of the year. But you’ll be much better off if you start planning well into the future – at least 20 to 30 years. Having this long-term mentality will equip you to set better short-term goals and make better decisions overall.

2.       Create an emergency fund. One of your best financial assets will be your emergency fund. Your emergency fund will be a lump sum of cash you can use if and when you need it; this way, if you face an unplanned expense (such as a medical emergency or an unexpected vehicle repair), you can get the money for it without going into debt. Generally, an emergency fund should cover at least a few months of living expenses; for many people, this is a few thousand dollars.

3.       Invest in disability insurance. It’s also a good idea to invest in disability insurance. There are two types of disability insurance available: long term disability insurance and short term disability insurance. In either case, you’ll be paying for a policy that will replace your income temporarily or indefinitely if you’re ever disabled and unable to work. This is highly important since anyone could suffer a disability that renders them unable to work. You can purchase disability insurance through your employer or through a separate insurance company or agent.

4.       Live below your means. The best financial advice is often the simplest: protect your financial future by living below your means. Basically, this means adopting a lifestyle that allows you to live at an expense level comfortably below your income. It often means living in a smaller house or a cheaper neighborhood than you can actually afford. This gives you extra money each month, which you can put toward debt payments, investments, your emergency fund, or major purchases.

5.       Open a retirement account. There are many tax-advantaged retirement accounts available for investors planning for the future, including IRAs and the employer-sponsored 401(k). Make sure you’re taking advantage of these, since they often allow you to invest more or enjoy more gains than you otherwise would.

6.       Create multiple streams of income. Even if you’re confident that your job will be available indefinitely, it’s a good idea to set up multiple streams of income. If you can make money through multiple jobs, side gigs, and investments, you’ll be better hedged against risk.

7.       Diversify your portfolio. Similarly, it’s important to diversify your portfolio. Assets like stocks and real estate can be powerful ways to make money, but you can’t put all your eggs in one basket. Protect your future by investing in many different types of assets.

8.       Consider liability insurance. If you want an additional layer of personal protection, consider investing in additional liability insurance, or an umbrella liability insurance policy. This way, if you ever face legal action, your assets may be protected.

9.       Have a career backup plan. No career is perfectly safe. New threats could emerge spontaneously to threaten your livelihood. To guard against this, have a career backup plan; how will you make money if your primary career is in jeopardy?

10.   Invest in yourself. In line with this, protect your future by investing in yourself. When possible, invest in new education, new training, and new skills that can make you a better-rounded and more experienced professional. It will help you get more promotions and raises in your current line of work, and could set you up for a different career in the future, if necessary.

The Importance of Adaptability

It’s also important to realize that no matter how effectively you plan, or how hard you work, things may not go the way you expect. You’ll face unanticipated challenges, changing situations, and tough obstacles that can’t be easily overcome. If you want to stand the best chance of building a bright financial future, you need to remain adaptable. Don’t be afraid to change your goals, your approach, or your strategies as necessary.