5 Practical Tips for Lifelong Financial Sustainability
Sustainability is usually a term about environmental issues. Lately, it’s become more of a personal finance term as well. That’s because financial decisions need to be sustained over the long term. To sustain you and your family over time, Financial Sustainability means planning and flexibility. Having Plans B, C and D is a necessity.
Here are a few tips for those who want to see their money stay around as long as they do.
Save Before You Invest
It’s a good idea to secure at least nine months of living expenses saved before even thinking about investing. As you plan your savings strategy, make sure you contribute enough to your retirement funds, particularly if your employer still offers a 401(k) match. Once you have your emergency fund, keep on saving. A good goal is to put aside at least 10 percent of your earnings each month (or as you can afford it). By retirement, you’ll have a nice chunk of money to nest in.
Keep Credit History Good
Being a habitual bill payer signals to banks and issuers that you are a risk worth taking. Paying credit cards or mortgages late will lead to negative consequences that damage your credit score and overall credit health. Banks and issuers consider payment history when evaluating your credit risk. A long-standing history of on-time payments suggests you are a responsible and reliable borrower; a poor history suggests you may not repay debts and could result in a costly loss. Remember that a credit report is like an adult report card.
Spend for Retirement
A simple trick for saving: spend less than you earn. That might not be easy if you are already having trouble keeping up with bills. A spending plan would take care of that. Some people call this a budget, but since we’re referring to retirement as something to buy, a spending plan is more appropriate. Think of a budget not as a means to the end of buying a 60-inch television but a budget that will sustain over decades that will put you out ahead financially once you’re deep into retirement.
Savings Plans Are Still Good If You Can Get Them
If your company still offers a traditional retirement plan like a 401 (k) plan, it’s a good idea to put in your money up to the point where the company stops matching your contribution. Even if the funds within the 401 (k) don’t make great gains some years, at least you know you have the company match that doubled your contribution. A fairly high-interest rate will come out of that. You might not have doubled your money by the time you are allowed to take it out, but it’s going to be a lot higher than what you could make on any other investment.
Make the Most of Income Sources Other than Savings
Choices of when to start taking Social Security can cut your retirement income by 25 percent or boost it by an additional 32 percent. Married couples can use strategies like claiming spousal benefits to increase income substantially. Factor in maintenance expense if your income comes in the form of rental properties. There’s a tremendous amount of benefit that some smart planning can do for you that will help over the long haul.