9 Signs of a Strong Financial Future
You’re killing it. Your family’s happy and healthy. Your career’s on track. You’re perfecting the art of “me time” with little indulgences. Your future is looking bright. Can the same be said for your finances? Here are nine signs you’re on track for a strong financial future.
1. You follow a monthly budget.
Ugh. The dreaded “b” word. While budgeting isn’t exactly the definition of a good time, it doesn’t need to be seen as a punishment either. Popular budgeting methods include the envelope system, the zero-based system, and the percentage system. While specific budget categories will vary from household to household, some general ones include housing, food, savings, and entertainment.
2. You have a debt payoff plan.
Who likes to owe money? No one! Debt payoff is essential to a strong financial future. One way to become debt-free quickly is to take a part-time job. Ideally, it should be something with a flexible schedule you can do right from home. There are several ways to approach a debt payoff plan, so choose one and go after it. The debt you select can be based on the smallest amount owed (the “snowball” method), the one with the highest interest rate (the “avalanche” method), or just whichever one you hate the most!
3. You keep a list of bills and due dates.
Nothing derails a good financial plan like annoying late fees or bad credit. Avoid both by keeping a running list of your bills and their due dates. If you are struggling, contact providers and see what can be worked out. You may be able to set up a payment plan. Remember, open communication is key. The worst thing you can do is to ignore bills and creditors.
4. You have a fully-funded emergency account.
Life (or you can insert a more colorful word) happens. When it does, make sure you have an emergency fund set up for unexpected expenses so you don’t have to max out your credit cards. You get to define what’s considered an “emergency” to you, but be realistic. Unexpected car repairs so you can get to work? Emergency. Flash sale on Louis Vuitton bags? Non-emergency.
5. You are saving for retirement.
As much as we may try to fight it, old age is coming for all of us. Unfortunately, 1 in 4 Americans has nothing saved for retirement, and many are under-saving. Make sure you aren’t one of them! The retirement savings account you contribute to may have a lot to do with your business or what your company has selected to offer. There are a lot of options, but don’t let feeling confused or overwhelmed stop you. Do some research online or talk with someone in your company’s HR department.
6. You’ve built a diversified investment portfolio.
Investing is a great way to build a strong financial future for yourself. Diversification just means “don’t put all your eggs in one basket”. There are countless options when it comes to setting up a diverse portfolio, but two popular choices are the three-fund portfolio and the all-weather portfolio.
7. You utilize multiple streams of income.
The secret sauce for personal finance goals lies in having many different streams of income, not just a job salary. (That whole eggs in one basket thing again.) There are three types of income streams: active, passive, and portfolio (already mentioned above). Earning extra money by working from home part-time is a great source of active income. Passive income examples include rent from a property you own or royalties from something you created.
8. You’ve established your financial goals.
Having a savings account for your emergency fund is great, but what about saving for things you want or want to achieve? It’s important to plan for different types of financial goals for yourself. You should create short, mid-term, and long-term goals. As soon as you achieve one celebrate like crazy—then set up the next one.
9. You’ve got the right insurance coverage.
You may feel like life, health, home, or car insurance are monthly expenses you don’t need. Think again. Something that costs you a little extra each month now is way better than having to face enormous amounts of debt later—which could kill your financial future in an instant. There are endless types of insurance coverage, so take some time to research which options are best for you.
How many of these personal finance essentials were you able to check off? Knowing you have a well-rounded financial plan means confidence and security in your future—and that’s something money can’t buy.