During uncertain times, like what we have experienced so far in 2020, it is important to preserve your financial future. Let’s take a look at five things that you can do to help secure your future financial situation, and guard against uncertainty and unpredictability.
- File your taxes. This is a great first step. Doing this as early as possible can provide you with numerous benefits, including: Reducing the likelihood of having your return stolen by identity thieves, having more immediate access to a tax professional, and most importantly, you will have time to plan, no matter the outcome of your filing. Once you file, you will have a clear picture of what needs to be done, allowing you to plan for the future, resolve any tax debt you may have, or plan what to spend your return on if you receive one. Filing your taxes is a great first step to financial security.
- Create a budget — and use it. This is another a key factor in protecting your financial well being in times of uncertainty. Creating a budget specific to your income and expenses allows you to know what you can and can’t afford, which will help you to allocate funds for paying off debts, planning for expenses, and will provide you with a clear picture of where and how you are spending your money. Understanding your monthly expenses and spending will help you build toward your financial goals and plan for the future.
- Start an emergency fund. Life can be unpredictable, as we’ve seen with COVID-19 and the resulting economic impact. Planning for a future emergency can help keep you financially stable during unpredictable and unstable times. Take a look at your budget, and determine how much money you would need to get through an emergency. Doing so will provide you with a savings goal, which will allow you to minimize stress in times of chaos.
- Invest. When you invest, you put your money to work for you, and your money ends up having its own income. Investing can also help reduce your taxable income, which can help you at the end of the year when you file. Investing can be relatively cheap for individuals as well if you start small. Even investing in a single mutual fund or a single stock can help you get started.
- Pay off high interest debt. This is another vital part of securing your financial future. Prioritizing paying off debt with the highest interest rate will save you more money and allow you to redirect funds to other financial goals faster. The longer you wait to pay off high interest debts, the more you will pay in the long run. Make sure you have an accurate picture of which of your debts have the highest interest, and spend a minute figuring how much of your payment is actually paying off your debt, and how much of it is paying off interest.