If an unexpected situation were to arise, would you have the funds available to continue meeting your financial obligations? Are you prepared to live comfortably in retirement if you end up receiving little or no social security payment? These are the types of questions that you need to contemplate when considering how to invest your money wisely. Here are five ways that you can invest in your future to make sure that you and your family are financially secure.
This post has been sponsored by Lexington Law. Please know that all opinions are mine alone and are honestly conveyed.
Start an emergency fund
One of the best ways to secure your financial future is to create an emergency fund. An emergency fund is probably not the first thing that you think about when it comes to the investing in your future. However, if you were to experience an accident and you weren’t able to work for a while, or you lost your job unexpectedly, or perhaps you experience another large-and-unplanned-for-expense, having an emergency fund will not only help you to have a financially stable short-term, but will also contribute to a more stable long-term. If you don’t have an emergency fund, and you experience a catastrophic event, you could get behind on your bills to the point that it may take months, or even years, to climb out of that debt hole.
Invest in yourself
Investing in your future, often means that you need to invest in yourself. This can be through obtaining a college education or learning a trade skill to qualify you for a better job, or it can mean focusing on your own health, fitness, and mental well-being. Looking at the expense of a formal education can be overwhelming. You must balance the benefits of the type of job you seek, with the cost of obtaining the education. So, if you want to go to college, but don’t want to go into debt to do it, there are ways to finance your education and graduate college debt free (or with very little debt).
Save for Retirement
Retirement seems so far away when you just start out working in your twenties. And while, at that point, retirement is 40+ years away, starting to save for it is very important. Why is it so important to start saving early? Because of the compounding effect of money. Compounding is basically your investment growing in value over time due to the interest earned on the principle and accumulated interest. Simply stated, the longer you have money set aside for retirement, the more interest that it will accrue, and the larger your asset will grow.
Open an IRA or Roth IRA
An Individual Retirement Account, or IRA, is a type of saving account that anyone can open on their own. With a traditional IRA, you can make contributions and enjoy a tax break during the year of contribution. With a Roth IRA, you are not able to take a tax deduction for your current contribution, however, your investment does qualify for tax-free growth. This means that you will not pay taxes on it when you withdraw the money in your retirement years. With either type of IRA, you are able to invest in your choice of stocks, mutual funds, or even CDs.
For 2019, your total contributions to all of your traditional and Roth IRAs cannot be more than:
- $6,000 ($7,000 if you’re age 50 or older), or
- your taxable compensation for the year, if your compensation was less than this dollar limit.
Contribute to a 401k
A 401k is a special type of retirement plan that is set up by your employer. Many companies offer a matching contribution up to a certain percentage as well. This means that if you opt to contribute four percent of your income each month, for example, your employer may match two percent of that. So, even though you are only having to contribute four percent, you receive the benefit of six percent total. Because this is set up by your employer, you will only be able to contribute to it while you are actively working at the company. Your investment options will also be limited.
Buy a house
When you are deciding whether to buy a home or rent, you may not realize that you are making a decision about investing in your future. Of course, there are some instances where you may want to rent rather than buying a home. But how do you know which is the right choice? Take a look at whether you should rent or buy to help you decided what your situation calls for…
However, when you do feel the time is right, buying a home can be a great investment. The reason buying a home is a good investment for your future is that you will build equity over time. And once your home is paid off, you will see a dramatic reduction in your monthly bills—which can be a huge benefit during your retirement years. Additionally, you can utilize your home’s equity if you need extra cash for home improvements, or to just live a bit more comfortably in your golden years.
Clean up your credit
Another great way to invest in your future is to clean up your credit. You may not realize that having good credit can even affect your future, but it does. In fact, it can have a huge impact on things like buying a house, car, obtaining financing for a new sofa, or even getting a job. Did you know that some employers perform credit checks as part of the hiring process? Showing that you are responsible with your own credit and finances, shows that you will be responsible with the company’s assets as well. Additionally, having a high credit score will qualify you for lower rates when you need financing, in turn, giving you lower overall monthly payments. And if you have lower monthly payments, you might just have extra money to put toward other ways to invest in to your future, such as: an emergency fund, education, retirement, or even buying a home.
Do you need help with your credit repair and don’t know where to start? Lexington Law offers a free consultation and credit report summary review.