The MFGS Chronicle – September 2015
Four Steps to Financial Security
We Americans have learned a lot of hard financial lessons over the past few years, as bubbles have developed and burst in the stock, credit, real estate, and employment markets. For many people, the so-called “new” financial reality has reminded us that the steps to financial security that served the Depression-era generation well still apply to us today.
What have people learned? You can’t count on stocks or real estate to always rise in value. Mortgage and credit card debt can sometimes be dangerous. If you have a job, you should prepare for the possibility that one day you may not be able to find work for an extended period.
Here are four tried-and-true financial principles with which your grandparents would agree, and collectively they are a clear path to financial security.
- Control your expenses: There is only one way to become financially secure, and that is to consistently spend less than you make.
- Get on a path to increase your income: Find a career that you enjoy, work diligently, and continually seek advancement.
- Aggressively save your money: Make eliminating your debt and building your savings a central goal of your monetary life.
- Control your risks: Even if you follow the prior steps perfectly, without proper insurance, one crisis can put you into a financial hole.
I am in the insurance business, so my role is to help you with item #4. Most people would instantly agree that health insurance is crucial. But so are other types of insurance. For example, if you were to quit work today forever and have to live off of your existing life insurance death benefits, how long would the money last? If the answer is not “forever,” then you need more life insurance to protect your family.
When you are nearing or in retirement, you will face new risks, such as the risk of needing assisted living help to maintain your lifestyle, and the risk of outliving your retirement savings. Long-term care insurance and annuities can help you to control those risks.
This may seem self-serving, but I am happy to let you know that not all insurance comes from a commercial insurance company. For example, you should self-insure the risk of unemployment. Make it a priority to build an emergency savings fund equal to three or more months of expenses so that you could survive without any income at all, or in case you have an unexpected expense. An emergency savings fund can prevent a short-term setback from significantly derailing your financial security.
Wayne McLeod, Safe Money Adviser
Affiliated with National Brokerage
The information provided here has been taken from third party sources and is deemed to be reliable, but is not guaranteed.
It is provided for informational purposes only, and you should consult with a tax advisor for further information.
Our organization does not provide tax advice.