You’ve worked hard to build a solid financial strategy, all while working within your budget. Still, you have worries. What if another economic crisis comes along? What if you become seriously injured in an accident?
Mountain America Credit Union put together five questions to ask yourself to identify where your financial strategy is strong and where it may need some additional support.
Question 1: Do you have money saved for an emergency?
An emergency savings account helps to ease the burden whenever an unexpected financial event occurs and minimizes the risk of added debt.
This account is not for just anything—even if you eventually pay it back. It’s specifically for necessities like when your car needs a new transmission, your refrigerator conks out or you need to replace your roof.
Question 2: How often do you review your budget?
Even if your income has stayed the same, your overall expenses are likely to fluctuate throughout the year. Reviewing your budget more often can help you adjust areas of overspending or irregularity and get back on track.
A monthly or weekly check-in helps you adapt to your changing needs. Plus, the more you use and review your budget, the more you’ll gain a general overview about finances and your own specific financial picture.
Question 3: What disability insurance do you have to protect yourself during high-impact health events?
According to the Social Security Administration, 25% of those entering the workforce can expect to be out of work for at least a year due to a disabling condition during their working years.
Since there is a strong chance you may experience a medical issue that requires a longer recovery, adding long-term disability insurance provides extra income protection in the event you’re out of work for an extended period of time.
Question 4: Have you set up an investment plan for retirement?
A best practice strategy for retirement savings is to start as early as possible. If you also have debt, consider loan refinance options. To shore up your financial safety net, concentrate the bulk of your money on reducing debt while making a smaller contribution to your retirement account. You’re likely to get more from your money by contributing to your retirement now while also working on lowering your debt. There are two reasons why: you’ll get more benefits long-term from compound interest and you can take advantage of company matching programs (basically free money!) available to you with a 401(k).
Question 5: How do you pay your bills each month?
If you pay your bills regularly, but sometimes find it difficult to make on-time payments, consider setting up a budget to evaluate the money you have coming in throughout the month. If you have enough coming in, try testing out auto pay for one or more of your smaller bills to decrease the stress of remembering to make all your payments on time. If you don’t, look at the timing of your income, your list of expenses and due dates to evaluate if there is a way to decrease your bills or make it easier to pay them incrementally throughout the month.
What to do now
Whether you feel you’re on track in all these areas or just a few, regularly evaluating your financial safety net is a great way to ensure your financial picture is complete.