(Newswire.net — July 2, 2020) — June marks the halfway point for 2020 and makes for the perfect time to begin thinking about what improvements to make for the next year. One way that you can make yourself better and relieve a lot of stress is by making sure that your finances are in order. Bad financial habits can equal catastrophe relatively quickly, so it’s very important to start on the right foot.
Dune Ventures understands that feeling in control of your finances is of the utmost importance right now and working to eliminate your credit card debt is a great way to start building your financial security net.
A financial safety net is a portfolio of security measures to protect your finances. A safety net is created not only to protect you but your family. The end goal is to secure financial security and prevent the derailing of long-term goals because of an unexpected incident such as a medical emergency or a family tragedy. You cannot protect yourself against everything that will come your way, but there are cost-effective measures that you can take to build this financial safety net.
Now that you have an indication of what building a financial safety net entails, here are few other ways to build one.
Emergency Fund
Many people do not anticipate anything devastating happening to them on a daily basis. While it is human nature to be complacent in this regard, you shouldn’t use it as an excuse to not have something prepared for an emergency. Also known as a “rainy day fund”, emergency funds are a stash of money that is held in a liquid savings account which is set aside for extreme financial emergencies such as medical bills.
Having an emergency fund is merely scratching the surface of creating a financial safety net, but it is a start. The objectives for this money is to make it easily accessible for hard times and to soften the blow of when those emergencies hit. The most important aspect of the emergency fund is not to use the money for anything other than an emergency. Using it to pay off monthly credit card bills or weekly responsibilities such as groceries may be an indication that you are not handling your money well. If you put money in an emergency fund, keep it there and do not do anything with it until an emergency situation warrants otherwise.
Life Insurance
Another general requirement for a financial safety net is life insurance. This is usually done if you have dependents such as a spouse or children who would suffer immensely if you were to pass away. If you were to pass, who does the burden of paying a monthly mortgage fall upon? Life insurance is met to provide those funds for your family to have some means of financial security.
You should also understand that life insurance is not restricted to just the top earner of the family. If your family has a situation where one is a stay-at-home parent, for example, you should consider the amount it would cost to replace the work that they provide around the house. Factors such as house chores and child daycare can be impacted heavily by a loss. Therefore, you may need to consider getting (or hiring) household help and whether or not you can afford it.
If you currently do not have anyone that is financially dependent on your income, life insurance isn’t as necessary. However, many people still use life insurance as a part of cash accumulation and estate planning, regardless of their dependent status.
Protect Your Income
You may not have considered it before, but the most valuable asset that you have at your disposal is your income-earning potential. With no salary, you are likely to face financial disaster quickly. Everything from bills to loans will continue to compound and will leave you in a worse financial position than when you started. This is where the importance of having an emergency fund comes into play and coincides with the other tips. If you do not have a set of funds stored away for tough times, you will likely be hit hard.
One area that people do not understand but should pay attention to is a long-term disability. Unfortunately, there is a wide misconception of long-term disability insurance with short-term disabilities. Having short-term disability insurance is essential while adding long-term disability insurance ensures that you have some income percentage. If you’ve never considered getting this type of insurance, you should also consider the fact that the odds of you having an injury longer than 90 days if you’re under 40 is higher than the odds of you dying.
It’s very much possible that your job may offer that kind of insurance as a benefit you can take advantage of. In order to do so, you should communicate with your job’s Human Resources department to get a disability quote for an individual policy that works for you.
Prepare For Retirement
When we are in our prime, we often do not consider retirement because it seems a long time down the road. However, it will come sooner than you think and most people are not saving nearly enough for when they decide to call it quits in the working world. While you are able, you should be making a savings plan for retirement now.
This will give you choices later in life and give you a huge safety net down the line. Saving for retirement now will also prevent you from running out of money while you are retiring. Life expectancy is constantly increasing, so while you have the time, always save a specific percentage of your income for future endeavors. All of the non-working years that will eventually come will require some kind of cash flow.