Financial security may seem like an elusive myth, but it doesn’t have to be. With focused attention to family assets in UAE and a game plan, managing your finances can become routine instead of a source of stress. Check out these six credit tips to make you more financially secure and start building your plan today.
1. Pay Yourself First
Money comes in, bills go out, right? Wrong — you did all of the work to earn the cash, so you’re the first one who should benefit from it. Recognize that you’ll have to pay your obligations eventually, but consider your needs first.
Stash cash in pre-tax accounts like your 401(k), health savings account (HSA), and flexible spending account (FSA). Leveraging pre-tax savings eliminates paying taxes today in favor of the earnings advantages and savings offered by these accounts. Pre-tax dollars allow your income to go further when you allocate your balance toward investments.
With HSAs and FSAs, you save money for more immediate needs — health care, medication, and child or eldercare. This approach allows you to boost your budget for these essential expenses.
2. Monitor Your Credit
Your credit score is your financial résumé for potential lenders. Even if you aren’t planning on taking out a loan, your credit has influence. A bad score can impact your ability to get hired, rent a new apartment, or avoid having to pay a deposit. Make it a regular practice to check not only your credit score but your credit report, too.
You can review your credit report weekly at www.annualcreditreport.com for free. Review your payment history, amounts owed, and open accounts. Somewhere along the way, you could have forgotten an old account. In worse cases, there may be an account open without your knowledge. If that’s the case, file a dispute to clean up your credit report from incorrect or malicious information.
If you need to work on your credit, consider using a credit builder card. These cards are secured with a transfer of your cash to your card account. As you use your card over time, good payment history and utilization information are shared with the credit bureaus. Your good habits can help boost your score over time.
3. Use Debt Smartly to Build Wealth
Debt can work in your favor sometimes. When used wisely, it can be a tool to help you build wealth. The average person is unlikely to have enough cash available to purchase their first home, even a modestly priced one. A mortgage with good terms and a low interest rate can help you become financially secure.
If you select a property at a low price in a neighborhood with potential, your asset should appreciate over time. Be smart about improvements you make to the property and pay attention to the fluctuations of the local market. Typically, real estate is one of the most solid investments you can make.
When you sell, you may be able to roll your profits into a down payment for your next home. If you stay in your home for the long run, it can provide you with payment-free living during retirement. No matter your plan, using mortgage debt to help you achieve your financial goals can be a great strategy.
4. Protect Your Assets With Life Insurance
While home and auto insurance are not optional, life insurance is. Unfortunately, when a tragedy arises and the deceased person was not insured or underinsured, it can easily become a crisis. Consider the financial gap that would be created by you or a loved one passing away.
If you are in your high-earning years and have young children, your family is counting on your income. For at least the next 15 to 20 years, your income will support raising children, house expenses, and potentially higher education. If you were to pass away, how much money would they be losing out on? Give your family the gift of financial security to help cover the financial gap created if you died today.
This potentially uncomfortable conversation is important. You have the opportunity to protect your family. Some debts can be discharged, others have a saleable asset, but student loans stick around even after you die.
Review your workplace life insurance options, as they often are the most affordable for the best coverage. Select an amount that covers your obligations, funeral expenses, and the financial gap that you would leave. Your foresight today will be a blessing to your family during one of the toughest times of their lives.
5. Invest With Your Age and Target Retirement Date in Mind
Leveraging your income by investing in the stock market is how an average worker can become a multi-millionaire upon retirement. According to Investopedia, the S&P 500 has returned an average of 10% to 11% from 1926 to 2018. To take advantage of this earning opportunity, consider your ideal retirement age against your current age.
Research investment knowledge articles and consider if a target-date fund would be a good choice for you. Target-date funds take into account your ideal retirement age and develop a risk-appropriate profile considering when you’ll need to access your money. These funds adjust over time without requiring action on your part.
Target-date funds are professionally managed and give you access to the best of the stock market without requiring additional research. This age-appropriate approach can allow you to focus your time on earning income and enjoying your life. While you’re having fun, your target-date fund helps you gain financial security.
6. Make Budgeting a Regular Practice
Without a budget in place, your money is likely to disappear before you even know what happened to it. Treat yourself and your money with respect by developing a budget that helps you achieve your financial security goals. Identify your current expenses and lifestyle preferences to develop a budget that toes the line between fun and frugality. Depending on your goals, your budget will look different.
For example, if your goal is to retire at age 50, you will need to keep your expenses to a minimum. Check in with your budget regularly and adjust as you need to. To make it easier on yourself, use app-based tools to review your expenses on your phone.
If you find that you need stricter boundaries on your spending, set account alerts. You’ll be alerted when you reach a spending limit, or if an account balance is lower than your ideal threshold. Managing and sticking to a budget will help you make progress on your goals toward financial security.
Say Hello to Financial Security
Financial security is a moving target and means something different to everyone. Stay in tune with what’s important to you as your career and life change. The goals you set at age 22 will likely change by the time you are 42. What’s important is that you prioritize your goals beyond tradition and make smart moves to help you achieve them. Because in the end, financial security means flexibility in both work and life.