Is there anything worse than feeling like you’re sailing the ocean on an old ship? You can see the storm clouds gathering on the horizon, but you can’t do anything to prepare for it. At least, that’s how it feels when you start preparing your financial plan and find out that it doesn’t take into account unexpected life events. After all, how can you plan for events that haven’t happened yet? Well, it turns out that you can prepare yourself by learning some simple financial management tips to help you through uncertain times.
Diversify your income
One of your most valuable assets is your income stream, so make sure it’s as diverse as possible. You don’t want all your eggs in one basket, says Andrew Stotz, president and co-founder of Money Boss. Stotz recommends that you have three to six streams of income, depending on your needs. If you have more than one job or business—for example, if you’re a self-employed writer—try putting money aside in savings each month so that if one source of income dries up, you’ll still have others coming in. Remember that having extra sources of income doesn’t mean being able to spend more freely; try finding cheaper ways to enjoy life’s experiences. A nice fancy dinner out is not worth overspending, Stotz says.
Set up a safety net
When you feel like you don’t have enough money to meet your financial obligations, it can be tempting to take on more credit-card debt or run up your credit cards. However, you should try hard not to turn what was once a problem into a crisis. Establish an emergency fund and make sure you’re saving for retirement.
Save more now
While it’s hard to predict how much cash you’ll need in an emergency, it’s easy enough to figure out how much you should be saving. Whether you’re considering your potential future income (such as retirement) or thinking about an unexpected expense like a medical bill, make sure you set aside some cash now. You can also look into alternative savings options that offer higher interest rates than traditional savings accounts; these accounts are insured by the Financial Claims Scheme (FCS) up to $250,000.
Build your credit score now
Your credit score isn’t just a number that lenders use to determine whether or not you qualify for a loan. It can also be a way of establishing a strong financial foundation. To boost your financial security, work on building your credit score and establishing good habits in managing your finances. Remember, when it comes to your finances, one important step at a time really does add up in terms of how much money you can save.