Life is full of unexpected developments, both beautiful and challenging. When it comes to your finances, it’s best to prepare for both. Whether you want to buy a bicycle, car, or even a home that you’ve always wanted, or to support your family through difficult times, responsible management of your finances is the place to start.
Savings and investments are, in short, purchasing peace of mind. As a general rule, most sources suggest individuals keep a minimum of three to six months of their living expenses in savings when ever possible. While not nearly as exciting for most as spending with reckless abandon, this fulfills an essential function for a financially secure future. Furthermore, the sense of financial security that it provides is worth it. Recent studies have shown an astonishing 69% of Americans have less than $1000 in savings and 34% hold absolutely no savings whatsoever despite retirements becoming almost entirely dependent on personal savings and traditional pensions being phased out of existence. This could be caused by a decline in earnings in the United States, although many struggle with this because they have no idea what role savings and investments should play nor where to even start. Savings can be thought of as a collection of monetary assets set aside for later use. One of the most commonly employed means of doing this is by maintaining a savings account. If you’re setting aside capital for immediate use on a big purchase or an emergency, this is it. By contrast, and varying in complexity, investments involve the purchase of something with an expectation (or calculated risk) to yield a return that is greater than the initial costs to the investor. In terms of priority, most people start with savings and eventually move excess funds into investments.
Now that we have addressed the fundamental principles of what savings and investments are, the matter of acquiring and setting aside an appropriate amount needs to be addressed. One of the best and most common solutions is through constructing and monitoring a budget. That is, calculating your expected income for a period of time, subtracting the cost of living, then dividing the excess according to your plan. Consistency is key in this practice, so you should carefully consider a specific portion that is not only achievable, but realistic, over a prolonged period. You can always make adjustments to include more or less over time, but responsible financial habits are made possible through monitoring your activities and measurable successes once these plans are set into motion. Setting a specific goal and tracking each step toward it also allows for a better understanding of habits and challenges. This not only assembles a blueprint that can be often referred to, it also lays the foundation for eliminating financial stress. Most people have a number of goals that they hope to reach, and will want to adapt their budget to fit both short-term and long-term prospects alike. You can start with listing your financial goals in order of priority, and the corresponding time frame available to reach them, if it better suits you. In the case of short-term goals, which can be something you wish to achieve in a matter of years or even months, it may command a sense of urgency if the window is limited. Seasonal vacations, performances, and even technology are all excellent examples. In such an instance, you can similarly calculate a savings goal by dividing the estimated cost by the number of months remaining. If the amount suddenly appears unfeasible, you know something should be adjusted, or that it may be unrealistic until further revisions are made. Perhaps you have a plan ready, but experience difficulty in its execution. Not a problem! If the issue is an availability of finances, consider moving the specified amount immediately after all monthly bills and debts are paid. There are many tools and methods available designed specifically for this purpose. For example, free checking and savings accounts are often offered by banks for direct deposit customers or individuals that hold a minimum balance. It is often possible to automate a monthly transfer of a specified amount from a direct deposited paycheck or checking account to your savings. If you’re still curious about budgeting, try the top 10 tricks for building the perfect budget. If you find yourself compelled to delve into these savings, the solution may be a matter of reducing or even eliminating unnecessary expenses. Dining, drinking, and entertainment outside of the home make up an exceedingly large percentage of spending in the average American household. Simply limiting these indulgences can easily lead to an exponential increase in savings for most people.
Some however have a savings account they’ve been adding money to for years along with an asset portfolio, but fewer have a plan to protect their assets and ensure that it can be safely passed into the appropriate hands. Considering how hard we all work to ensure our family’s financial security, what happens to it all in the event we meet an untimely end is an important consideration. Many have heard of a ‘will’, but few realize the hidden costs and legal proceedings that may impede or delay the bestowing of one’s inheritance, otherwise known as probate. A California living trust is one of the most versatile and seamless ways to ensure your estate is safe, while still allowing for revisions and avoiding probate to better protect beneficiaries. It can also be tailored to address any number of potential scenarios, with individual provisions to deal with them. Furthermore, a living trust is a confidential document, not filed or executed in court, nor a matter of public record, in stark contrast to a will. In the face of adversity, a swift, concise and effective solution can mean everything. Especially when concerning loved ones that depend on us. Time is the one thing money cannot buy, but we can invest to ensure we make the most of what time we have.
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