Life has a funny way of knocking people down. One minute you think you’ve gotten things figured out, all set for what’s to come next, but then the unexpected happens. It’s no secret that most folks are going to go through some sort of financial hardship in life, but there are a few keys to alleviating the potential burden.
The goal here is to prepare for the worst while still living a healthy lifestyle. I know it sounds boring but doing so will be one of the most rewarding experiences you can have, which is why I’m going to walk you through on how to get there.
Cover Your Bases
Although it’s probably one of the oldest pieces of financial advice, it’s also still one of the most sound. Starting a nest to save up in the event of a rainy day can be a lifesaver one day your future self will thank you tremendously for. While I know going out on a Friday or to a music festival might be more fun, those experiences are short lived in comparison to the amount of financial security you’d possess by saving. And even though we could always say “you should save more”, younger generations should especially start taking note.
According to a survey by GoBankingRates, a staggering 69% of Americans have less than $1,000 in their savings account. I’m willing to admit that while life can be random, and regardless if you have $1,000 or $10,000 saved up there’s no telling how much the unexpected will cost, $1,000 can be blown through relatively quickly. And that’s one emergency you definitely don’t want to be in.
Granted, a lot of folks have relied heavily on credit cards to help them get through rough patches, but this can lead to being in more debt than initially anticipated. Additionally, as noted by FICO, with over 83% of millennials using credit cards to fund their lifestyle, the added factor of utilizing your credit for both your daily routine as well as the unexpected can be a scary proposition, and one you should reconsider if you’re currently in.
Assess Your Risks
It should be no surprise that in your financial timeline, you’re more likely than not to take on a healthy amount of financial risks. In some cases, this can be a good thing, as it could potentially lead to growth, either in the short-term (I.E.: playing the stock market) or the long-term (I.E.: Appreciating assets, like a house). But if you don’t play the game carefully, it can cost you big time, which comes with quite a bit of consequences.
For starters, you should alway shop around when making major financial decisions. Even just inquiring can bring your credit score down via hard inquiries and soft inquiries. Additionally, read the fine print of every loan or line of credit you take out. According to the American Bar Association, practices such as predatory lending costs Americans around $25 billion annually, which can leave you in financial ruin for a long time. And finally, always keep up with your credit report as according to Lexington Law, collections on credit report can sometimes be inaccurate or even downright identity theft. Overall, the rule here is to play it smart, once you’ve mastered that, you can be off to smooth sailing.
Make Smart Investments
While no one is asking you to become the next Warren Buffet, placing smart investments can be widely beneficial in the long run, as this is money you get to watch grow. I know you might be squeamish to investing, which is normal. As noted in a study by Blackrock more than 50% of millennials find the stock market too risky to enter. However, while Hollywood would have us believe that playing the stock market is like a weekend in Vegas, that’s simply not the case.
Not only can investments be a great way to make some extra money, but additionally be a source of savings as well. Contributing to things like mutual funds and letting it grow over five to ten years is a pretty safe bet, even if the market goes through some turbulent times. Remember, while there’s always highs and lows in the stock market, the overall market has gradually gone up for almost a century. In short (no pun intended), stocks are a patient person’s game.
Having yourself avoid money trouble is not only smart but could possibly put you in a place of better financial position than you were before. Take the time to study up and learn about your options with what you have. After all, if you’re starting from square one right now, what do you really have to lose?