Personal finance can involve much more than just income, expenses, and savings. Whether you’re saving for the future, trying to increase your income, or repaying debts, there are many strategies than can improve your overall approach to personal finance. Taking the time to consider some of them and budgeting carefully can have a big impact on your ability to save, make money and live well. These strategies can set you up effectively for retirement or give you more disposable income to play with now. Before you put more money into your basic personal savings account, you may want to consider some of these strategies as well.
1. Retirement Plan
There are a number of retirement plans you may want to consider investing in if you want to save money for yourself down the road. If your company has a 401(k) Plan, you might consider putting some of your paychecks towards that every month. Some employers also offer a match, putting money into your plan every time you do. If your company doesn’t have a 401(k) option, you may consider a Traditional IRA or Roth IRA, depending on whether you want your retirement savings taxed now or at the time of withdrawal. You may even be able to check with your employer about a SEP Plan, which combines some of the benefits of a 401(k) employer match with a personal IRA.
2. Life Insurance
Another way to prepare for the future is a life insurance policy. This can be especially important if you have a spouse, a partner, or dependents. A good life insurance policy will provide a certain amount of money to people who may be relying on your income in the case of your death. These policies can also prove to be a kind of investment strategy on their own: getting a 7702 plan, for example, can provide some cash value beyond the promised death benefit amount.
While retirement accounts and life insurance plans can provide some forms of investment, you may also want to consider short- or medium-term investments of your own. These investments managed personally or by a licensed broker, can provide a cushion of income to fall back on in case of emergency and can grow into more substantial amounts over five or ten years than they would if left in a standard personal savings account. Nowadays, there are plenty of online stock trading platforms that can put the power of investing in your own hands.
4. Debt Repayment
No matter how much you have saved, if you have existing debts, they can be a drain on your overall net worth, limiting your income and causing your financial growth to stagnate. In addition to increasing your savings, you may want to consider increasing your debt payments as much as possible. Exceeding the minimum repayment options can allow you to pay back debts faster, reducing interest paid and increasing your overall net worth. Once you’ve fully paid one debt, you can even consider adding the amount you were repaying to another debt, stacking your repayments to eliminate debt even faster. This can allow you to take on necessary debt for larger purchases, like cars and houses, with less stress and can increase the amount of income you’re able to keep over time.
Financial management can involve much more than just spending less than you make and saving the rest in one account. There are many options that can boost your savings, your income and your safety net for later. Getting involved early can be valuable: every extra year of investment income can increase your retirement savings or other nest eggs by large amounts. Instead of sticking to a simple savings plan, you may want to consider some of these options to give yourself a good financial foundation. From there, you can feel confident that you’ll be financially ready to weather any storm life might throw at you.