8 Financial Items You May Be Ignoring
There’s so much to worry about when it comes to your finances. Making sure you are covering all your bases is a big job. Here are eight areas you may be overlooking.
Wherever you may be on your own financial path, there is always room for improvement. Whether it’s reducing financial risk with insurance, saving more for retirement or even something as simple as better password management, protecting yourself from financial risk brings peace of mind.
With so many items on your financial to-do list, it can be easy to overlook some things. Here are eight often ignored financial planning items to keep your eye on:
Risk reduction
Even with careful planning, the unexpected can happen. However, there are things you can do to reduce the risks. That’s where insurance comes in. Insurance mitigates the risk of greater losses we may experience throughout our life. It’s important to revisit your coverage as well. Life changes and you want to make sure you’re covered adequately.
- Make sure you have enough life and disability insurance to cover car payments, mortgages and other expenses. This will help ease the financial burden on your family if anything were to happen to you.
- Along with homeowners insurance, make sure big-ticket items in your home are documented. Taking videos of major appliances, electronics and other expensive items (remember to show the serial numbers) will help you get your possessions replaced in the event they are damaged or stolen.
- Consider adding umbrella insurance. Many people aren’t sure what this insurance product is or why they need it. Essentially, umbrella insurance is just extra coverage that provides protection beyond the existing limits of other policies. It can provide coverage for a multitude of situations including injuries and property damage.
Estate planning
No matter how much we may try, we cannot slow the hands of time—we are all getting older. Estate planning is one of those financial items that many people put off. However, it’s actually an important component of any retirement plan. In most cases, it’s a fairly simple process.
Once you’ve prepared your will, trust, power of attorney and medical directives, make sure to revisit it every three to five years to account for any life changes.
Password management
Passwords are central to everything we do these days—making sure they are strong enough to protect your information is key. Fraud efforts are on the rise and tend to spike during the holidays. What can you do to lessen the chances of falling victim to a fraudster? Enable two-factor authentication and review all your accounts and choose unique passwords for each.
Savings rate
Your savings rate is the percentage of your income you contribute to your savings. There are many reasons your income could increase—like a bonus or raise—and many people view the money as “extra” and a good reason to splurge on something they’ve been wanting. Instead, consider upping the amount you’re earmarking for savings.
Lifestyle inflation
Our lifestyles tend to become more expensive as we make more money. It’s natural! But “keeping up with the Joneses” can quickly get out of hand. As your income increases, try to maintain your current lifestyle and you’ll likely end up more prepared for the future.
Tax benefits
If your employer offers a 401(k) plan, be sure you’re taking full advantage of it. Some employers offer a matching program up to a certain amount. If you’re not contributing at least that much, you’re leaving free money on the table! Review your 401(k) contributions regularly to make sure you’re maximizing your retirement savings.
Don’t forget about health savings (HSA) and flexible savings (FSA) accounts. These accounts let you set aside money on a pre-tax basis to pay for qualified out-of-pocket medical expenses. By using untaxed dollars to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs.
Mid- and long-term savings
Most people save for two reasons—uncertainty and future success. Instead of absorbing the cost of an unplanned expense when it arises, like a car repair or medical expense, set up an emergency fund. Of course, you’ll never be prepared for everything that comes your way but saving six to twelve months of expenses give you a cushion so that your monthly budget won’t have to take such a big hit.
When it comes to expected expenses, save more purposefully by giving each savings goal its own account. Saving for a new house, a family vacation, or holiday shopping is a lot easier when you always remember why you’re saving. having funds allocated to specific purposes will help put purpose behind your money.
Retirement
Saving for retirement certainly isn’t at the top of everyone’s list—if you’re still in your you’re your golden years seem eons away, right? The reality is that the earlier you start saving, the longer your money has to grow (ever hear of compound interest?). So, no matter what age you are, now is a great time to start putting away money for retirement—even if it’s just a small amount.
Planning for your financial future takes work. Be proactive and make sure you’re not ignoring these crucial areas.
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