Ways to help keep finances in top shapeMany U.S. workers may be just one emergency away from draining their bank accounts. Expensive surgeries, unemployment or unexpected home repairs could force individuals to pay hundreds of thousands of dollars in a short period of time. As a result, long-term financial interests may be at stake every day in which personal finances are not adequate to meet demands.
Not only do workers need to cover their routine expenses, but also the costs associated with the unexpected. And knowing how much to set aside is hard to determine, especially if there is little income left over at the end of each month for saving. However, taking the time to craft a strong practical budget that addresses unplanned events may be the only way to help secure income for retirement.
Here are a few tips to help maintain a good financial budget in the face of emergencies:
“The goal is to cut any financial fat wherever it exists and to update budgets accordingly.”
Without a reserve account, individual have few options against unexpected costs. The Wall Street Journal recommended it's a best practice to have at least three to nine months worth of income stashed away at any given point in time.1 This backup cash allows individuals to maintain their standards of living and afford the unexpected expenses in the meantime, tiding them over until things are back to normal.
Cut the fat
Reducing unnecessary expenses or costs that have become unduly burdensome is key to staying on top of out-of-control budget problems. Main St, an online resource for financial advice, indicated fluctuations in the economy are a given, but financial fortitude should be something that all workers should practice.2 If gas becomes too expensive, then look for alternate transportation options. If employers reduce sponsored contributions to retirement plans, then search for other financial vehicles. The goal is to cut any financial fat wherever it exists and to update budgets accordingly.2
Manage debt loads
Debt may be one of the biggest inhibitors to savings. Because many of us tend to have high debt loads, interest continues to build up, siphoning off valuable financial resources each month. By paying down these debts more quickly and keeping debt-to-income ratios below 28 percent, individuals can help ensure they are not putting their pocketbooks at risk of disaster, according to The Wall Street Journal.1
By having a budget in place, workers can insulate themselves from unplanned expenses and keep their retirement assets safe from harm by not having to withdraw from those assets early.
For greater financial confidence, consider purchasing an annuity to help be sure you will have retirement income when you need it.
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**Some annuities may have a lifetime income guarantee as part of the base policy; others may have riders available that provide this benefit. Riders may also be available for benefits like an annual increase to help combat inflation or for as much as doubling your income in case of a qualifying health event. These annuities are not long-term care and are not substitute for such coverage. Optional riders may be available with a charge.
1 Moyer, Liz. "5 tips for passing a personal finance stress test." The Wall Street Journal. March 11, 2015. http://blogs.wsj.com/briefly/2015/03/11/5-tips-for-passing-a-personal-finance-stress-test
2 Notte, Jason. "How to expect the unexpected from your personal finances." Main St. April 6, 2015. https://www.thestreet.com/story/13094166/1/how-to-expect-the-unexpected-from-your-personal-finances.html
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