In business and life who knows what’s around the corner? As the heavyweight boxer, Mike Tyson famously quoted, “Everybody has a plan until they get punched in the mouth.” However, it’s how we deal with crises and the planning that we do in advance that can mitigate risks. There are plenty of provisions that we can put in place to make ourselves less fragile against future financial issues.
With the current troubled economic climate, now is the time to prepare for those uncertainties to weather the financial storm and come out unscathed on the other side. You can start making some small changes today. We’ve listed below the 10 ways to bulletproof your finances that will load the dice in your favor for the future.
Whether it is home insurance or income protection, now is the time to get just about any kind of insurance that you can think of. In particular, life and health insurance if you don’t already have it. This way, if anything unfortunate should happen to you or your family, you’ll have some sort of coverage in place to help secure your finances.
Create a budget
This is one of the most crucial steps to take during unstable times. If you’re already living on a budget, great! This is crucial for keeping cash flow in check. There is plenty of information out there on how to create a budget that’s right for your household. If at all possible, make your budget even more detailed and track it to the penny by writing down every expenditure.
Create an emergency fund
This is one of the most basic suggestions and it is one that we all know, but we all have bills that we’re trying to pay off or are otherwise in debt. So how do we pay off this debt if we’re forced to dip into our emergency fund? One way you can do this is by saving up your emergency fund before your debts. This way, your debt is paid off by the time you are in need of your emergency fund. Also, create an emergency fund that you won’t touch unless it’s an actual emergency.
Save money monthly for big purchases
Think about saving for your dream car, or perhaps a vacation. You can even save up for something as minor as an iPad or a new laptop. In any case, the point is that you’ll be saving money over time, which will accumulate to a substantial amount for those plans you have waiting, later on down the road.
Don’t carry a balance on your credit cards
Credit card debt can be devastating to your finances, and a major cause of people filing for bankruptcy. Also, if you have an emergency and need money, you’ll have to pay a fee for going over your credit limit. Keep this in mind when you are carrying a balance on your credit cards.
Read up on basic financial advice
The best way to be prepared is to know what you’re doing with your money in the first place. Learn about compound interest, risk diversification, and other basic financial concepts that can help you better invest your money and help you weather the financial storm if need be. You can find plenty of articles and books on personal finance that can give you good tips on how to invest your money and apply some basic financial concepts. If you still don’t understand the financial world, you could always hire a financial advisor.
Save for the future of your kids
If you have children, this is something that you should consider investing in as well. If they are young adults, you can open up a 529 savings plan for them so that they can start saving while things like tuition costs are still low. You can also set up a custodial account for them to save for their own children and grandchildren so that they can have the same chance at life that you had when they were growing up. These accounts can be used to pay for education and healthcare costs as well as other costs that may arise in the future.
If paying off your debts was on your list of things to do today, then this is a crucial step to take in order to pay back those creditors faster and reduce your monthly payments. For example, you may have a car loan at 8% interest with a credit card at 16% interest and a second credit card at 18%. You might have a mortgage somewhere else at 4%. By consolidating all of these bills into one loan (depending on the amounts), you can reduce the overall interest you pay (which will be a lot lower than the 36% interest you would owe with the three separate bills). Consolidation may be a great way to reduce debt and save money on interest payments.
Create a budget for holiday expenses
If there is one time of year where people go crazy with their spending, it’s during the holiday period! It’s important to have an idea of how much you plan to spend during the holidays so that you can set aside the money for that purpose in advance. For example, let’s say you want to buy a gift for each of your 200 friends and family members at $50 per person. That would cost you a total of $10,000! This is a very simple example compared to the amount that many people spend during the holiday season. Plan accordingly so that you don’t overspend your budget.
Save money before buying anything
Want to buy that new $2000 TV? Well, if you want to make sure you get it, then it may be time to start saving up beforehand so that you have the money ready when you go to make the purchase (if you can afford this purchase). The same goes for vacation plans or anything that could potentially drain your finances, and there are plenty of ways you can save money which you will be thankful for in the long run. Plan ahead as far as possible so that your savings are there when you need them the most!
Now I realize that many of the financial tips here are easier said than done but they are a good reminder of what you could be doing differently when it comes to your finances. These tips and tricks are just a few of the many other things that can be done to help bulletproof your finances against anything that comes along. In general, this involves planning ahead with steps like those mentioned above so that you are prepared in advance for any crises or urgent financial situations that may arise down the road. There is nothing worse than waking up one day in a financial hole that you can’t find a way out of. Finances are important for the well being of other aspects of our life including marriage and family. Take these tips and stay on top of your financial troubles for the well being of yourself, your spouse, and your family.