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Financial security can sound intimidating if you’re just starting to pay attention to your money. In fact, it wasn’t too long ago that Mr. MMM and I were spending like we didn’t have a care in the world. We were going out to eat all of the time and we weren’t making our finances a priority.
That’s not to say we were ignoring our money, we just weren’t focusing on creating wealth or our future financial security. That all changed when we nearly bought a large house we couldn’t comfortably afford. After that, we took a long, hard look at our money and our lives and decided to do a hard reboot. So if you’re in a similar situation and are looking for a way to take control of your finances, this article is for you.
Despite the importance of money in our lives, it’s still a highly stressful topic for most people. And it doesn’t matter whether you’re earning a six-figure salary or minimum wage, if you’re having difficulty paying your bills, you’re going to be worried about your life.
When finances spiral out of control, debt is inevitable. Unfortunately, it’s easy to become buried under debt. Making ends meet is vital to your health and security, and the health and security of your family.
Still, this doesn’t mean you need to throw your hands up in defeat and decide that you’ll never be able to give your family a financially secure future. There are always ways to overcome debt and stretch your money, whether you’re earning a lot or a little.
If you’re intrigued, read all about the basic building blocks for how you can protect your finances in order to ensure a better future for you and your family.
Budget Your Money
Paying attention to your money is the first step towards ensuring financial security. And the best place to begin when securing your finances is to track your money. There’s no need to hire a professional; anybody can track their finances and make a budget on their own. There are many free tools out there to help you manage your money. We personally love Personal Capital and Mint. They’re both free and they’re both simple to use.
First things first, it doesn’t hurt to become financially literate by doing some research and talking with people you trust. After you gain a basic financial understanding, it’s time to start budgeting.
How To Make A Budget
Make a list of all your necessary expenditures for the month, including food, gas, rent/mortgage, utility bills, etc. Don’t forget to list/estimate incidentals. Do you have a birthday gift to purchase this month? What about a haircut? Does your cat need to go to the vet? You need to account for all of these irregular expenses in your monthly budget, as well. BTW, a budget cannot just be made and put on autopilot. Because expenses change from month to month, you’re going to need to create a new budget every month.
After you list your expenses, you need to subtract them from your income to determine your disposable income. If your expenses are more than your income – you have a BIG problem. If you don’t take care of it now, you’re going to continue to be in debt. Not only will you continue to be in debt, but your debt is going to grow.
The point is that the best way to protect your family’s future is to constantly track your spending and make sure that it doesn’t exceed your income. You need to live within your means. And if you’ve needed to borrow money in the past (whether for college, a house, or over-spending) then you need to put your disposal income towards paying off that big debt first. Get rid of your debt by making them a priority over everything else. And if you don’t have any disposable income, you need to look for ways to make more money. Check out these tried and true side hustle ideas!
Before you start feverishly searching the Internet for the best health insurance, life insurance, and auto insurance rates, make sure your family is self-insured first. What do I mean by self-insurance? The most basic policy of all – an emergency fund. Many experts suggest an emergency fund that boasts a minimum of 3 – 6 months of expenses.
If the prospect of saving 3 – 6 months worth of expenses makes you want to curl up in a corner and cry, don’t worry, you don’t have to save this amount overnight. And in fact, when you’re starting from scratch, any amount of savings in an emergency fund is better than $0. You start where you start.
Don’t be ashamed of that. We started a few years ago in a less than stellar position for our ages. That didn’t stop us. And now, we’re cruising along towards financial independence. It can happen for you, too. You’ll see.
When you’re in the financial groove, following your budget, and saving for your e-fund, your numbers are going to skyrocket. You’ll be amazed at the sense of security you’re going to feel. And when you feel secure, so will the other members of your family. Everyone wins.
Other articles you might enjoy:
- Budgets Are For The Birds
- 14 Ways to Reduce Your Utility Bills This Winter
- Crush Your Student Loan Debt With This Simple Tool
- The Simple 1-4-4 Rule We Use To Grow Our Wealth to Staggering Levels
- Our Surprisingly Lazy (and Free) Money Management System
Insurance may be a costly blow that makes you wince when you check your finances every month, but it’s more than worth the money for the peace of mind it would provide you and your family if something unfortunate were to happen.
There are so many different things in life that can happen without warning, and your best bet is to simply have a safety net in place. Not only should you have a good healthcare plan and life insurance, you should also have quality auto insurance so that you’re supported in the event of a car accident. Unfortunately, car accidents happen, often. Just ask us. Ugh. Fortunately, we’ve never been seriously injured. But, it sure was nice having our insurance company helping us every step of the way.
Getting insurance is all about making sure you don’t suffer twice when things go wrong, as they inevitably will. It’s better to pay a little bit of money on a regular basis to avoid being faced with one huge bill that could, quite literally, ruin your financial future.
At the end of the day, your family’s security needs to be your priority. Do some research on the types of insurance you might need. It all depends on your financial situation and the most important things in life you want to protect, both in terms of assets and your family.
Save. Invest. Repeat.
After your budget is set, you have some money set aside for a rainy day, and your insurance policies are paid, the next thing you need to do to protect your family is to start saving money. This savings goes above and beyond your emergency fund.
You should be saving/investing a certain percentage of your earnings on a regular basis. Some people like to start with 10 – 20%. More aggressive folks, like the people on F.I.O.R., shoot for 50% or more. It might seem like a crazy high amount, but you’d be surprised how quickly you get used to a high savings rate.
And just what else do you need to save/invest for? Here ya go:
- Your child’s college fund
- Becoming completely debt free – I’m talking about the mortgage here
- That once-in-a-lifetime-vacation to “insert dream location here”
- Anything you want
Track Your Net Worth
My last piece of advice is to track your net worth. It’s a basic tool that is often overlooked when starting a financial journey or reboot. We use Personal Capital to track our wealth. It’s super simple and it’s free. You can’t beat free.
The beauty of tracking your net worth is that it doesn’t matter if you’re paying down debt or flat out investing for your future, your net worth is going to go UP either way. That way, if you’re stuck in the pay-off-debt phase, you’re actually going to see your progress as your net worth increases with each debt repayment. So, what’s stopping you? Give Personal Capital a try today!