Financial security— feeling confident in your financial plan and ability to earn enough money to care for your family— is one of the most rewarding financial goals you can achieve. Financial security means you can cover expenses you didn’t expect, take your time making major decisions, and expand your generosity.
In short, financial security gives you options. Instead of living paycheck to paycheck, you can focus on the activities, people, and experiences that mean the most to you.
Want to increase your financial security? Start with these 5 strategies
Reaching financial security is a challenging process. It takes discipline, planning, and a good understanding of both personal finance principles and tax-smart saving and investing strategies. Frugality alone, or picking just the right high-return stock, isn’t enough to give you financial freedom.
But by leveraging each of these 5 tips, you can protect your family from instability and safeguard your financial future:
Financial Security Strategy #1: Establish a realistic emergency fund
An emergency fund is one of the first big steps you can take towards building a more financially secure future.
Emergency funds give you extra money to cover a major and unexpected purchase, like a car repair or medical bill, without taking money out of your investments or retirement account.
A good rule of thumb is to have enough money in your emergency fund to comfortably cover your monthly expenses for about six months. But you don’t have to save your emergency fund in a traditional savings account! Today’s high interest rates mean you can earn a solid return by saving your money in a high yield savings account— which means that money can keep growing while it sits.
Financial Security Strategy #2: Aim for a debt-free lifestyle
Being debt-free is a key component of achieving financial security because the interest you’re paying on a credit card or a car loan is almost certainly costing you more than you could earn on any investment.
Here at Cook Wealth, we help clients build debt payments into their comprehensive financial plan. If you’re unsure which debt type to tackle first, we’ll use the snowball method (also called the avalanche method) to help you knock out your smallest debt first, then work your way up. Because there’s hardly a goal more rewarding than to be financially free from debt! And the faster you pay down your credit card debt and other loans, the sooner you can reach financial security— and start saving for your long-term goals.
Financial Security Strategy #3: Make a retirement plan
The next strategy you can use to feel secure in your finances is to make a clear retirement plan for your Golden Years.
A good retirement plan balances tax-smart saving, informed investing, and real-time adjustments as the market (and your life!) change. And with the power of compound interest constantly working in your favor, a solid retirement plan is one of the best ways to guarantee you can enjoy a financially secure future.
Financial Security Strategy #4: Save smart— and in right places
Saving smartly involves understanding the different types of savings accounts, and how each can impact your taxes and timeline.
We see some savers pour all their cash into one general savings account, including what they need to cover emergencies in the short-term and what they’re setting aside, long-term, for a house, college tuition, or big vacation. But the best savings strategies utilize multiple buckets. Saving is always a great idea! However, without the right savings strategy in place, your financial security can be at risk.
Financial Security Strategy #5: Balance your investments
As every personal finance expert will tell you, no investment is without some level of risk. But depending on your age, career path, net worth, and lifestyle, the best amount of risk for your situation varies.
For example, for a young professional still decades away from retirement, financial security can mean adding higher-risk investments with greater volatility to their portfolio. And even for those nearing retirement, your balanced portfolio can include a mix of high- and low-risk assets. The key is to diversify your investments so you’re insulated from the market’s fluctuations. The more your assets react differently to changes and trends, the more financially secure your plan becomes.
Above all, financially secure investment strategies, like the ones we develop here at Cook Wealth, consider both ROI and tax efficiency. Because the best profits are the ones you get to keep!
And our best advice to achieve financial security? Ask for help!
Financial security doesn’t mean avoiding risk, minimizing your living expenses, and hiding from the world. You can achieve financial stability and enjoy life! You just need a strategic plan to get there.
At Cook Wealth, we believe every family deserves freedom from financial stress. That’s why our tax experts and CERTIFIED FINANCIAL PLANNER™ professionals go the extra mile to help every client plan for a financially secure future.
To talk about your financial goals, retirement plans, or investments, book an easy intro call with our team, or take our quick quiz— Do I Need a Wealth Advisor?