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This month it was my pleasure to join the Lincoln Military Housing team for a financial readiness workshop. We set out to discuss what it takes to build a solid financial foundation. Our goal was to highlight a set of behaviors that are, unfortunately, not as common in our day-to-day lives as they should be.
Here's a recap of the moves you can use to help take charge of your personal finances.
Protect your life, loved ones, and possessions.
In a word, this is insurance. Making sure your protection package keeps pace with your life is a smart way to help keep your finances on track. Insurance provides a safety net. Life is always changing, and insurance is by no means a fire-and-forget proposition. Yes, that new house means you need to exchange your renter's policy for homeowners insurance, but it also may come with a mortgage that needs to be accounted for in your life insurance plan. As your life changes, so will your insurance needs.
Spend less than you earn.
Live within your means. This is where the rubber meets the road. Build and live within a budget that allows room for saving while also ensuring less cash leaves your pocket – or bank account -- than enters it. Do that, and you'll be well on your way to turning your finances into an asset – pun intended – not a liability. Sounds pretty simple, but obstacles are everywhere. Just watch an hour of TV, track your social media, or listen to the radio, and you'll see what I mean. Our society constantly encourages us to kick this critical move to the curb. Ignore that messaging and prosper.
Save for emergencies.
Yes, you do need an emergency fund — sooner rather than later. The pandemic has created yet another reminder of this fundamental truth. Making a commitment to controlling debt and living within your means is at the heart of financial security. However, having at least a small emergency fund in place will allow you to keep that commitment when things go awry. And if nothing else, 2020 has shown us that just when we think we've seen it all… Set up a savings account and start working on building a cash cushion today.
Save now for retirement.
Time can be your ally, but for that to be the case, you must get your savings program started. Stop putting it off. Start or increase what you're saving for retirement. The Thrift Savings Plan, 401(k), or IRA (each come in a Traditional and Roth version) are all tax-advantaged options to enlist Uncle Sam's help as you build a nest egg to help live the life you want to live.
Prepare your legal documents.
With a legal assistance office right around the corner (or on the other side of your monitor!), this one should be easy. Here we are talking about having up-to-date plans regarding what should happen if you pass away or are incapacitated. Wills, powers of attorney, letters of instruction, and beneficiary designations are all part of ensuring you've clearly defined your wishes as to what will go to whom, who will make decisions if you can't and who will take care of your kids if you're not alive to do so. This is important stuff, whether you're 23 or 83, wealthy or not. So, get it done!
Have a financial plan and keep it up to date.
This is the equivalent of an operations order. It's a list of objectives and actions that all point towards achieving your goals. If you haven't, or it's been a while, take the time to sit down with your significant other and discuss goals, resources, and priorities and create an action plan you both agree on.
At USAA, we think this shortlist gets right to the heart of what it takes to become financially secure. Start your journey today.
By JJ Montanaro, CFP®
Relationship Director, Military Advocacy, USAA
This material is for informational purposes. Consider your own financial circumstances carefully before making a decision and consult with your tax, legal or estate planning professional Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER TM in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
USAA means United Services Automobile Association and its affiliates.
No Department of Defense or government agency endorsement.
Have a question not listed above? Email LMHComms@lpsi.com