Finance is an essential part of our daily lives, affecting every aspect of our daily living – and our future prospects. What we do with our finances today can make a big difference in our ability to enjoy life in future, so planning for the future and sorting out any problems you currently have is really important.
Deal with existing debts and loans
Every credit agreement needs to be paid back eventually, and most credit agreements come with an interest element. Even if your debts and loans do not have an interest charge your ability to enjoy your earnings or retirement provision in the future will be affected by outstanding loan repayments. For this reason you need to try and pay back any outstanding loans as fast as you can.
It is the interest elements on these loans that can be a particular problem. Paying interest on a loan or debt can be a very big drag on your ability to spend money now, but also impedes your ability to save. If you’re unable to save money into a pension fund or other investment you may struggle in future and find retiring difficult.
Save up and invest
Retirement planning is crucial and it is never too early to start thinking about saving and investing for the future. The compound effects of interest and investment growth mean that you need to save a lot less if you start saving early in life, whereas the percentage of your earnings you need to set aside if you start retirement planning late in life will be much bigger.
Think about investing in a pension fund as soon as you start employment after school or university. You can start with a small contribution and gradually increase it. It is also a good idea to buy the property you live in as soon as you can – payments made to a mortgage will lead to ownership of a property, whereas rent paid will never improve your future prospects.
Prepare for the unexpected
Considering topics such as death or disability is never pleasant, but it is an essential part of getting your finances sorted in the long term. Insurance policies that cover everything from a sudden bereavement to extended ill health and unemployment can significantly reduce the financial burden you could face in such adverse circumstances.
For example, in major cities like New York or Dallas, cremation and funeral services can be extremely expensive. A good funeral policy will cover your loved ones for the full costs involved. Life insurance is equally important, as the loss of the main breadwinner in a family can have disastrous consequences for the spouse and children left behind.
Security requires planning
A secure financial future is in essence achieved only by sound financial planning. You need to avoid accumulating short-term debts as much as you can and focus on paying back long-term debts such as mortgages. Think how much money you will need to retire on, and plan to save accordingly. Finally, do not let your financial security be ruined by unexpected events – plan for these by taking out the appropriate insurance policies.