Financial security is a concern of almost everyone. Knowing that your life and your children’s future are not at risk of financial ups and downs is critical to your happiness and peace of mind. But financial stability isn’t a result of just wishful thinking. It does take effort, discipline and consistency to ensure.
In addition, it is important to be prepared for unexpected emergencies and life misfortunes to minimise their impact. All of this requires planning and the ability to live within sound financial-planning rules. The more you have your goals defined, the better you will be able to achieve them, which eventually can help you reach financial security.
Although starting your planning early in your adult life is the best route, it is never too late to adjust your lifestyle to ensure that your future is financial stable. You will need to understand the basics of how to maintain your finances to avoid spirals of debts, how you can put money aside to create a comfortable cushion of savings, and how to be prepared for personal financial crisis.
Here are the details for each of these steps.
Save and avoid debt
Not all debt is bad, but you must avoid adding debts that stretch your budget too thin every single month. If you’re financing anything from a car to a vacation, make sure that your additional debt can fit comfortably within your budget. If it doesn’t, you must search for Plan B that helps you avoid taking this extra expense.
Avoiding debt also is related to having sufficient savings that help you go through hard times such as illness, divorce, death, etc. These savings should be accumulated over years, and set aside for such a rainy day. So when you see your savings account inching up, don’t be tempted to splurge immediately on some unnecessary purchase. Learn to be patient because you never know what emergency could be lurking around the corner. Once you’ve a good amount of savings (sufficient to cover your expenses for six months to a year at least), treat yourself to a luxury purchase.
Develop discipline
Money isn’t everything in life, but it is a critical aspect to keeping families from falling apart and ensuring welfare. So when you’re making decisions on jobs or spending, be respectful of your finances. For example, think twice before quitting a job without another one in hand. A spur-of-the-moment travel decision that costs you thousands of dirhams may not be a good step, unless you have the money set aside for it or know how you will repay it.
The point is it only takes a few wrong financial decisions to create a money crisis that can spiral beyond control. So while taking life not too seriously is a good approach, it pays off to respect your finances, create wealth and ensure that your family’s future is secured financially.
Think long term
Retirement, children’s college education, and the like may seem far-fetched ideas if you’re in your twenties or even thirties, but they do require long-term planning. So although it may be tempting to make the best out of the present, planning for these future events is a must. Dedicate time and effort to explore your options. Set up funds that can’t be easily accessed for other purposes, and contribute to them regularly.
To do so without pressuring your budget, you must pick realistic goals that fit your income now and later. Although you may want to have a million dirhams on your desired date of retirement, that might not be possible, especially if you’re beginning to save later in life. Work with a financial planner or with your bank representative on realistic goals to ensure that you will be able to commit to them.
The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.
Financial security tips
- Have a cushion of savings
- Avoid spirals of debt
- Take money issues seriously
- Set long-term plans
- R.O.