Building a Solid Financial Foundation
10 Tips for Building a Solid Financial Foundation
Getting your financial household in order once and for all helps prepare you financially for all the potentialities you may face in your lifetime. With a solid financial foundation, you can withstand just about every bout of market turmoil or financial crisis that may be heading your way. Here's how to set yourself up for success:
Establish Adequate Cash Reserves
In the event of a downturn in the markets, a family emergency, or loss of income, nothing is as comforting as having adequate cash reserves to get you through those rough times.
Invest in the Ability to Earn Money
One of the biggest assets you have is your ability to earn money. In uncertain times, invest in yourself. COntinue to sharpen your axe, whether you're securely employed, between jobs, temporarily retired, or permanently retired. Often, the easiest way to reduce the stress and strain on your investment nest egg is to continue to earn money, even for a short period of time.
Give yourself Credit
Managing your debt wisely-by minimizing or eliminating debt-reduces personal and financial stress. Building an excellent credit history provides you with options to access money of and when you need it.
Insure your Income
If you're not yet retired, make sure you have adequate disability inurance. If you need your paycheck to survive, you need disability insurance, just in case you can't earn that paycheck due to a prolonged illness or injury. If others (such as your spouse or family)d depend on your income, you also need adequate life insurance to replace your income if you die prematurely.
Provide for Healthcare Expenses
Make sure you have medical insurance and consider whether long-term care insurance is right for you.
Cover Your Assets
Periodically review your homeowner's or renter's insurance, automobile insurance, and liability insurance to make sure you're adequately insured.
Diversify You Investment Portfolio
One of the best things you can do to minimize the majority of investment risks is to effectively diversify your portfolio.
Monitor and Rebalance
After you establish the proper diversification for your investment portfolio, spend a little time on it once or twice a year. Make sure you're monitoring your investment portfolio's performance relative to its peers on a risk-adjusted basis, and be sure to rebalance your portfolio back to your original target allocation.
Plan for Certainties in Life
Many of the major events that occur in your life shouldn't come as surprise. Maybe the timing is a surprise, but the event itself shouldn't blindside you. Think about these potential events. Is your car on its last leg? Do you have children who you want to help through college? Would you like to be able to retire and maintain your standard of living someday? These events are near certainties. The details or timing may be fuzzy, but these events will most likely occur. Prepare in advance-as much as possible-for these eventualities.
Get Help
If you're unsure of where to turn for personal help and direction about your personal financial situation, be proactive. Get help sooner rather than later. With time on your side, you have many more options.