With rising inflation, high interest rates, and a general economic uncertainty, it can be difficult to manage your finances and prepare for the future. The good news is that there are some steps you can take now to help future-proof your finances and minimize your financial stress.
- Review Your Budget. Prices on a lot of everyday items have increased dramatically over the past several years. For this reason, it’s a good idea to review your budget and make sure it’s in line with today’s reality. Have your monthly grocery costs increased? What about your utility bills? If your expenses have gone up, you’ll need to adjust your budget accordingly. Look for ways to reduce costs where you can, and ensure you have the funds necessary to stay on top of your bills.
- Build an Emergency Fund. As you reevaluate your budget, be sure to earmark some of your monthly income for savings. The last thing you want during uncertain economic times is to be living paycheck to paycheck. How would you get by if the labor market takes a negative turn and you’re out of work for an extended period of time? In times of unemployment and other emergencies, you want to avoid living off of credit cards. Racking up large amounts of debt can damage your credit score and be very difficult to bounce back from. A better option is to prepare for the worst now. If you don’t already have one, establish an emergency fund. Aim to save up at least 3 to 6 months’ worth of living expenses, and consider placing your emergency funds in a high-interest savings account to help your money grow faster.
- Stay Informed with Current Events. It’s critical to pay attention to what’s happening around you and across the country. Knowledge is always beneficial. Stay up to date on current events that could impact the economy. This will help you make informed decisions about your money. For example, if you’re thinking about buying a house, keep a close eye on news about the housing market. This can help you figure out the right time to buy, what’s likely to happen with mortgage interest rates, and give you a sense of what kind of competition is out there among homebuyers. Likewise, if you’re hearing about a lot of bank failures in the news, you’ll want to make sure that all of your bank funds are protected. Ensure that your bank is FDIC-insured, and be aware of whether your deposits currently exceed FDIC limits. If they do, you should consider a bank that has supplemental deposit insurance. Staying apprised of current events can also help you better understand when interest rates might change on savings accounts and CDs, helping you to ensure a high rate of return on your deposits.
- Seek Financial Guidance. Financial professionals can be critical in helping you make informed decisions about your money. An accountant or tax professional can guide you through complicated tax laws to help you save money and maximize your savings. Similarly, a financial advisor can help you formulate an investment plan based on your unique financial goals. Just be sure to properly vet a financial professional before working with them to ensure they’re licensed and have a good track record.
- Be Proactive About Debt. If you have a large credit card balance, you’re throwing money away every month in interest fees. Large amounts of debt can also be detrimental to your credit score, making it more expensive for you to borrow money later on for a home, car, or education. Given this, climbing your way out of debt is a smart financial move, especially in an uncertain economy. By being proactive about paying off your credit cards, you can save money on interest charges and start improving your credit. If you have debt on more than one credit card, consider transferring your balances to one card with a low interest rate. This is called consolidating your credit card debt. You might consider opening a new credit card with a 0% introductory offer and transferring your balances to that new card. Having a few months to pay down your balance without accruing more interest can be very helpful and allow you to reach your credit card payoff goals faster.
- Seek Additional Income Streams. Depending on your current work schedule, you might consider taking on a second job or overtime at your current job. Maximizing your income during times of economic uncertainty can help you save up additional funds so you’re in a better financial position if your hours are cut or you’re laid off down the road. You’d be surprised at how many options there are for making a bit of “side money”.
- Consider Low Risk Investments. As mentioned before, it’s always a good idea to consult with a financial professional regarding major investment decisions, but you might consider moving some of your funds from a traditional savings account to a low-risk CD or money market account where you could earn a higher interest rate. Many banks also offer high-interest savings accounts to help you maximize your return. Unlike traditional investments like stocks and bonds, CDs, money markets, and high-yield savings accounts are typically FDIC-insured. CD rates are also typically guaranteed for a specific period of time, so you can lock in a great rate for the next several months or more!
- Be Flexible. It’s important to keep in mind that your financial situation can change fast. In the event of a job loss, medical crisis, or other unplanned emergency, you may need to adapt your financial plan and budget with little notice. This is why it’s so important to have a little wiggle room in your budget, and to ensure that you’re actively saving money when you can. Doing so can help you protect your long-term financial well-being. Staying ahead of the frustrations that tough times bring isn’t easy to do, but you’ll have more peace of mind if you have a plan in place and the flexibility to meet changing circumstances.
If you’re thinking about bulletproofing your finances, Bank5 Connect is happy to help. We have a variety of deposit accounts to meet your financial needs, all of which are protected in full by a combination of FDIC and DIF insurance. We also offer a variety of credit cards, including some with 0% introductory rates to help you consolidate and pay down credit card debt. Don’t hesitate to contact us today if you have any questions about which Bank5 Connect products might be the right fit for you.