10 Money Management Tips to Prepare for Life Events
Even if you end up developing a financial plan with a trusted expert, you should still focus on steps you can take to better manage your own finances on a day-to-day basis. Smarter spending habits and an emphasis on saving can help you lower your living expenses and create more opportunities to save.
1. Create a comprehensive household budget—and revisit it regularly.
Break down your spending limits by category. Money management tools, including mobile apps and tools that integrate with your bank’s checking account, can help you set limits and track spending month to month. As you start to track and monitor your habits, you might be surprised by what you learn.
2. If possible, set up and consistently contribute to an emergency fund.
Experts recommend that consumers save anywhere from 3-6 months of living expenses in an emergency fund. If you’re just starting out, don’t stress about the savings task ahead of you—just try to put away a little extra money from each paycheck, building up a financial buffer to cover unexpected costs.
3. Find out if your employer offers benefits packages that can help.
Many employers offer 401(k) matching, which is essentially free money. If you make a contribution to the 401(k), your employer will offer to match those contributions up to a set limit. These contributions are in addition to your base income, so do everything you can to maximize this benefit and boost your retirement savings.
4. Automate your financial obligations, particularly savings.
If you’re new to saving, making it a habit to contribute regularly can be difficult—especially if you’re easily tempted to spend money elsewhere. Automatic contributions take the decision-making out of your saving efforts, turning these contributions into another bill that is paid from your bank account every month.
5. Keep a close eye on automatic payments, such as subscriptions.
Subscription models are all the rage in today’s economy, and businesses love them because they offer guaranteed revenue even when customers don’t use those services. Review your subscriptions and make cuts to services where you aren’t getting your money’s worth.
6. Explore side gigs, investments, and ways to earn passive income.
If your current income isn’t enough to support your financial needs—including your monthly expenses, savings goals, or retirement investing—a side gig can be a flexible source of income that offers a short-term financial boost. This can be particularly valuable when working to pay off debt or build up your emergency fund.
7. Do your best to avoid debts and loans, and prioritize repayment.
Debt can create a drag on any financial progress you’re trying to make. Although it is tempting to prioritize saving to keep more money in your pocket, repaying debt can actually offer the greatest long-term value—especially if that debt carries a high interest rate, as is the case with most credit card debt and personal loans.
8. Monitor your credit score and seize opportunities to strengthen your report.
First things first: Check for any errors that need to be contested and corrected. Then, consider where your credit report has room for improvement. Is your debt utilization too high? Have you made too many credit inquiries in the past two years or missed bill payments? Free tools, such as Credit Karma, offer free credit score tracking and insights into your credit report.
9. Leverage financial calculators and other tools to plan out your goals and monitor progress.
How long will it take you to save for a down payment for a home? What about saving for retirement? Numerous easy-to-use online tools exist to help you evaluate your future financial needs and lay out a simple plan to reach those goals on your desired timeline. Plus, missed payments can rack up fees and interest. Use a financial calendar to track all of this spending, and make sure you’re sticking to your savings plan.
10. Get professional guidance if needed.
Nobody can predict the future—not even a trusted financial planner. However, having a reliable partner throughout the financial planning process can help you account for scenarios that could arise in the future. These life events could include a change of income or marital status, inheritance or insurance payouts, medical expenses, or other events that change your financial outlook. A strong plan and a dependable advisor can help you anticipate these scenarios and give you the financial flexibility to make adjustments on the fly.
Contact FSCB today to find out what kind of financial planning services your local bank offers.