Tips for Building Financial Security

With the cost of living on the rise in many urban locations, an increase in health care expenses and many people taking on the financial responsibility of caregiving, financial well-being continues to be a top concern and a significant source of stress around the world. And more than 100 million individuals in Australia, Canada, the U.S. and the U.K. report that they do not have enough emergency savings to afford two months of living expenses without income.

Whether you’re just starting your career, finding yourself in a financial bind or trying to manage your financial stress, here are 10 tips for embracing a financially secure future and improving your financial well-being:

1. Create your financial plan. Visualize what financial stability looks like for you and your family, then develop a financial plan to put you on the path to achieving it. A strong financial plan will help you and your family prepare for your immediate, medium-term and long-term expenses. Start by setting financial goals for 1, 5, 10 and 30 years and creating a list of your current and future financial obligations based on your wants and needs.
2. Make financial planning a family affair. Make financial planning a family activity, so that you can develop a complete picture of the financial obligations of your entire household. Keep in mind that financial plans will be fluid and it’s likely that you’ll need to reevaluate and adjust your plan as you experience life changes (e.g., marriage, birth of a child/adoption, new job).
3. Yes, you need a budget. Once you’ve set your financial goals, build a comfortable life and take control of your finances by creating a monthly budget and sticking to it. A good budget should consider all sources of income, expenses (fixed, flexible and unplanned) and savings.
4. Educate yourself and your children. Get to know financial terms, such as compound interest, asset management, annual percentage rate (APR), comparison shopping, diversification, principal and annual percentage yield (APY) and share your knowledge with your children and other loved ones. Start teaching your kids financial literacy as early as kindergarten — explain the importance of earning money, saving money and giving back, and how to practice healthy spending habits. Children who learn to manage their money become adults who are well equipped to make sound financial decisions.
5. Prepare for a financial emergency. Protect yourself and your family from financial hardship by purchasing supplemental insurance, such as life, disability, accident, home/auto, pet and identity theft insurance, and setting up an emergency fund to help you prepare for the unexpected. Your emergency fund should include three to six months of savings to cover your expenses in the event of an emergency.
6. Have the difficult conversations. Difficult conversations are necessary to prepare your loved ones for financial security in the event of a death in your family. Make sure your family knows where to find important health, financial and legal documentation, and share your plans for a living will, power of attorney and legal guardianship.
7. Secure your information. Aggregate and store your health, financial and legal documents in a secure, yet accessible, location that you have disclosed only to your closest loved ones. If you are securing your documents online, remember to set privacy questions and create difficult passwords. If you are saving printed files, store them in a lockbox or safe.
8.  Save smart. Set a portion of your monthly income aside each month — 20% to 30% (or as much as you can afford). Make it easier on yourself by automatically transferring a percentage of your paycheck to your savings account with online banking. Check your local benefits program or other group discount programs to confirm any voluntary insurance benefits or perks that may be offered at a discount.
9. Practice mindful spending. Allocate at least 50% of your income to necessary expenses. A smaller percentage (20% or less) should be spent on “wants.” Be mindful of your spending patterns by understanding your spending cues, adjusting your unhealthy spending habits and designating a “no spend” day (or week) once a month.
10. Make informed investments. Investing your money is key to building wealth over time, but it’s not always as easy as it looks. Investing requires you to make choices, manage risk, consider personal circumstances and more. Make informed investments by researching your options, building a diversified portfolio and seeking help from a financial advisor when necessary. A retirement planner can also help you invest your money wisely to plan for the stable and secure future of your dreams after retirement. The GuidanceResources Employee Assistance Program (EAP) also has many free financial resources to help you make well-informed investments.

Also, check out these financial tips from your global colleagues and share your own tips with the Global Well-Being Community.

Always save for your retirement first, starting with a small amount, and increase to at least 10% of your income.
Tushar Patel, U.S.

I follow the 50 – 30 – 20 budget strategy: 50% of income goes to needs such as food, clothing, shelter, bills, etc., 30% goes to savings and 20% to lifestyle and entertainment.
Precy Servito, Philippines

Organize and save your legal and benefit documents in a safe and secure location. Jay Lin, U.S.

The checklist proved a catalyst to discuss finances with my wife. But consensus on a common way forward for family finances is being reached.
Gehan Sri-Pathmanathan, U.K.

Make a 5-year plan, with annual goals. Reassess every quarter at least. Be aggressive in your savings in the first 10 years.
Poorva Honmode, India