While the future is uncertain, adequate planning can prepare you for nearly any situation. Steps such as reducing debt, getting life insurance, maintaining a budget, building an emergency fund, and starting early on retirement can help you maintain financial security and gain peace of mind regarding your money. Let's dive deeper into five ways to plan for a secure financial future.
1. Pay down your debt
Debt doesn’t just reduce your monthly cash flows. It also costs you extra in interest. Paying down debt can help you free more money for living expenses, savings, and investments. High-interest consumer debts, like credit cards and personal loans, can be a great place to start. There are two popular strategies for reducing these debts:
- Debt snowball method: Pay down your debts from the smallest to the largest balances. Each time you pay off a debt, roll over your savings into the next-smallest debt. This can build momentum through a faster first payoff but may cost you more in interest.
- Debt avalanche method: Pay down debts from the highest to the lowest interest rate. Each time you pay off a debt, you can move on to the debt with the next highest interest. This can save the most on interest but may take longer to build momentum.
Consider consolidating, refinancing, and using balance transfer cards as well. These can help you secure lower rates or temporary 0% APRs to help you save more and pay off debts faster.
2. Get a life insurance policy
Life insurance can help protect your loved ones financially in case you pass away. If this happens, they can receive a substantial death benefit to help replace your income, pay off debts, and save for emergencies and future goals. There are two broad types of life insurance:
- Term life insurance: With a term life insurance policy, coverage can last 10 to 30 years, depending on your choice. Coverage can expire, but premiums are low.
- Permanent life insurance: Premiums are higher, but coverage lasts for life. The policy comes with a cash value growth component that grows with each payment and earns tax-deferred interest at a rate varying by policy type. For example, whole life insurance has cash value that grows at a fixed, guaranteed rate. You can borrow against or withdraw from the cash value when it grows large enough.
Regardless of the policy you get, life insurance helps provide peace of mind by ensuring your loved ones have coverage if the worst happens.
3. Create and stick to a budget
Budgeting can help you establish consistency in your day-to-day finances by helping you track expenses and set aside enough to save regularly. It also helps enable you to find costs you can cut to save more money. For example, you may discover that you’re paying for subscriptions you don’t use or spend more than expected on discretionary costs.
4. Build an emergency fund
Emergency funds are savings accounts to help cover unexpected expenses like job loss, unplanned car repairs, and medical bills. They help you cover the cost of the event and living expenses while minimizing or avoiding debt.
Emergency funds should generally contain three to six months of living expenses. If you have dependents, aim for the upper end of that range. Consider a high-yield savings account so your emergency fund can earn interest when unused and keep up with or outpace inflation.
5. Save for retirement early
The earlier you begin saving, the more potential investment growth you can enjoy. This is due to compounding, where your investment gains earn more. As a result, you can either get ahead on retirement savings or aim to retire at the same age with more savings. Furthermore, you can have more time to plan for your future and adjust your course as necessary. For instance, if you alter your desired retirement lifestyle, you may have more time to change your savings and investment strategy to stay on track.
The bottom line
No one can know what the future holds. However, the right steps now can help secure your financial situation regardless of what happens. Start by reducing your debts, particularly high-interest debts, and consider a life insurance policy to help protect your loved ones. Meanwhile, create a budget, build an emergency fund, and start saving for retirement early. The sooner you take action, the more secure your financial future could be.
Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Aflac Coverage
Life (A68000 Series) - In Arkansas, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, & Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68100-A68400. In New York, NY68100-NY68400. Term and Whole Life (B60000 Series) - In Arkansas, Idaho, Oklahoma, Pennsylvania, Texas, & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Group Whole Life (Q60000 Series) - In Arkansas, Delaware & Oregon, Policy Q60100M. In Idaho Policy Q60100MID. In Oklahoma, Policy Q60100MOK. In Texas, Policy Q60100MTX. Group Term Life (Q60000 Series) - In Delaware, Policies Q60200M. In Arkansas, Idaho, Oklahoma, Oregon & Texas, Policies ICC18Q60200M, ICC18Q60300C, ICC18Q60400C.
Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY or VA. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations and exclusions.
Aflac coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage is underwritten by American Family Life Assurance Company of New York.
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