Debt is an everyday struggle for millions of Americans. As of 2023, the average American was carrying $21,800 in personal debt (not including their mortgages). This is a challenge that is hard to overcome. However, the journey has only begun once one gets themselves out of debt. Once that major hurdle is crossed, then the real work of building long-term financial wealth begins. Today, we want to take a look at the steps that one should take to ensure that they build the kind of lasting wealth that brings real security with it.
Here is what you Need to Know
- Establish an Emergency Fund
The worst thing that can happen to you after spending a lot of time getting out of debt is to go immediately back into debt once again. However, that is precisely what happens to many consumers when they don’t take the time necessary to establish an emergency fund.
Ideally, your emergency fund will be somewhere in the range of three to six months’ worth of expenses according to Wells Fargo. This is enough of a cushion to take on many of the unexpected expenses that life can throw at you. It is also enough money to help you weather a storm such as the loss of a job or an unexpected medical expense.
While it might take some time to build up an emergency fund of that size, it is worth the struggle to do so. Such a fund will provide you with more comfort and peace of mind than you would otherwise have.
- Create a Budget That Works for You
Going hand-in-hand with the concept of establishing an emergency fund is the fact that you should create a budget that works for you. The investment company, Edward Jones, explains that selecting a budget that works for you is the ideal way to create a winning system for your life:
With so many methods and levels of detail to choose from, budgeting can seem intimidating. But keep this in mind: The most thorough budget in the world works only if it works for you. Edward Jones recommends more detail if possible, but if you’re more likely to stick with a less detailed budget, try that instead.
This is something worth keeping in mind as you sit down and decide how you will construct your own budget. Remember, what works for you may or may not work well for someone else. Feel free to test out a few different budgeting strategies before you settle on the strategy that works best for you.
- Focus on Your Retirement Accounts
Some of the best accounts to focus on when creating a foundation for your financial future are retirement accounts. These accounts often feature a number of tax benefits and are a great way to grow your money.
Putting money into a basket of different types of investment vehicles is a great way to diversify your holdings and make it more likely that your money will grow over time. The growth of your funds over time is what you need to rely upon when attempting to establish a strong financial future. Make certain you take a look at the various retirement account options that are available to you, and start piling funds into the accounts that have the most advantages for you.
If you work for an employer that offers you matching funds towards your retirement accounts, make certain you take advantage of those funds. That is just like free money for you, and it is so important that you capitalize on any amount of free money that is laid out on the table for you.
These are just a few of the things that can happen in an economically bleak time. Therefore, the connection between economic instability couldn’t be more clear. When the economy worsens, so too does your opportunity to make a better financial life for yourself.
- Check Out Your Insurance Holdings
Another element of your financial life that can help bring you more peace of mind are your insurance holdings. When you have the right policies for yourself and your loved ones, you are more likely to have some peace of mind about the financial future that you have created for yourself. It is all about knowing what kind of policies you currently have and how much coverage you really need.
Various types of insurance that you need to be holding to create more security for your future include the following:
Quality Car Insurance – It is a requirement in most jurisdictions to carry at least a minimum level of automobile insurance to lawfully operate a vehicle. However, you shouldn’t necessarily simply stop at the bare minimum amount of coverage to protect your vehicle. You can purchase a more comprehensive policy to provide yourself with a great sense of security no matter what happens out on the road. The premium might be a bit higher for you on a monthly basis, but the comfort of knowing that you have quality coverage makes it well worth your while.
Comprehensive Life Insurance – Knowing that your family will be taken care of no matter what happens to you is the peace that is provided to you when you purchase quality life insurance. Many employers offer supplemental life insurance policies as a benefit to their employees. Take advantage of these offerings if they make sense to you, and use this type of insurance to create a stronger foundation for yourself and your family moving forward.
These are just two types of insurance that you need to keep an eye on, but you should make certain that you have all of your bases covered.
- Don't Forget to Treat Yourself
You have likely had to curtail your spending to a serious degree to get yourself out of debt. That is something that can become something that serves you well as you work your way out of debt. However, you don’t want to put yourself in a position where you never treat yourself again. If you don’t treat yourself on occasion, then you will simply burn out and might not stick to your financial plans.
Besides all of that, you also deserve at least the occasional treat for all of the hard work that you have put into getting yourself out of debt. At least allow yourself to have a treat on an occasional basis.
For more information about how to create a better financial life for yourself moving forward, reach out to our team and contact us for even more ideas about how to get and stay on the right path.