Four Finance Tips for Successful Living

The economy in the United States is among the strongest in the world. But that doesn’t mean that U.S. citizens are impervious to problems like soaring cost of living expenses, high interest rates or unemployment. In fact, many people struggle to live paycheck to paycheck. Because unexpected emergencies can arise, and people are living longer, it is more important than ever to evaluate spending and saving habits. Financial experts suggest these four finance tips for successful living:

ESTABLISH EMERGENCY SAVINGS NOW

Have three to six months’ worth of living expenses saved. Credit Repair explains that folks should have an emergency fund. This is an account that contains money you intend to use only for financial emergencies such as the loss of a job, medical expenses, and car and home repairs as examples. They offer this general rule. “To apply this to yourself, tally up how much you spend monthly on your mortgage or rent, other loans, insurance, utilities, groceries and transportation, and then multiply it by the appropriate number to see what your saving goals should be.”

PREPARE FOR THE FUTURE WHILE YOUNG

Most people in their early twenties are thinking about college, landing their first important job, and establishing a career path. However, it is also a time to begin to think about retirement. Yes, retirement. Per Investopedia, time is on the side of the young and the sooner you get started, the better. Even a small amount saved for retirement can make a huge difference in one’s future. They explain, “Compound interest is the best reason it pays to start early with retirement planning. If you’re unfamiliar with the term, compound interest is the process by which a sum of money grows exponentially due to interest more or less building upon itself over time.” Note that saving is important even for those who are late to the game, too.

REVIEW YOUR ASSET ALLOCATION

Asset allocation is a fancy term for the implementation of an investment strategy that weighs rewards and risks. Note that returns on assets are not equal. For example, assets linked to market returns (stocks and bonds) are frequently affected by market volatility. Therefore, it is important to diversify investments. Per ICICI Prudential Insurance, “…by investing in multiple asset classes, you can reduce risk, lower the probability of losses and improve the possibility of earning better returns.” Experts state that when it comes to investments, one size does not fit all. Investment strategies are unique and change with age and financial goals, so it’s important to review your asset allocations periodically to make sure you are safely balancing rewards and risks based on your tolerance level.

WAIT TO TAKE SOCIAL SECURITY

Financial professionals say, as a rule, it’s a good idea to wait until age 70 to claim Social Security benefits. The main reason for doing so relates to getting bigger monthly payments by waiting. NBC Today Show provided this example, if you are born in 1961 and claim Social Security at the earliest, age 62, you’ll receive 70% of your benefit, giving you a monthly payment of $1,260. However, if you wait until age 70, you’ll receive 124% of your benefit, with a monthly payment of $2232. There are reasons why some people may want to dip into Social Security on the early side. One might absolutely need the monthly payments for immediate financial emergencies, have health issues that necessitate taking it early, or are ready to retire and do not care about the penalty. Despite some exceptions, most people ultimately fare better waiting until full retirement age.

Effects of the economy on daily life

The American economy is generally viewed as strong, especially in comparison to other nations. Despite this, many citizens are affected by the increased costs of goods and services, inflation, taxes, unemployment and more. Consumers can feel the pain at the gas pump, grocery store, pharmacy, and beyond. Because unexpected financial situations may arise and people are living decades longer than those in generations past, it’s important to be in the know when it comes to finances.

Here’s more:

If you enjoyed reading our four finance tips for successful living, and you’re interested in learning more about finances, visit: NerdWallet’s Budgeting 101: How to budget money. For information about how to establish an emergency savings fund, click here. 

This article is purely informational and is not intended as a substitute for professional financial advice.