A new year provides a fresh opportunity to get on top of your finances, and your emergency preparedness plan is a great place to start.
Monetary emergencies can be difficult for anyone, but as a caregiver to your elderly parents, you’re especially vulnerable. However, there are five steps you can take to put yourself, your loved ones and anyone else who depends on you in a better position.
Many Americans struggle with budgeting, but it’s an important process that can be relatively simple once you get started.
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Here are some common spending categories you may want to track:
* Mortgage or rent
* Mobile phone
* Cable/satellite and/or Internet
* Transportation costs (car payment, gas, bus tickets, etc.)
* Car maintenance
* Health care
* Child care
* Dining out/entertainment
* Credit card payments (break out any new purchases into preceding categories)
Look through your monthly bank statements and create a budget based on the amount you’re spending. In one column, input the average amount of money you spend on each of these categories each month. In another column, input the amount of money you will spend in the future after you trim spending to save a little more. Here are a few suggestions:
* Most utilities will allow you to pay a set monthly amount based on your average usage to make your monthly budget more predictable.
* Downgrade your mobile phone plan and eliminate your landline.
* Get rid of higher-tier cable/satellite packages.
* Call credit card companies to request a payment plan and lower interest rates for paying off debt.
* Reduce or eliminate expenses related to dining out, entertainment, new clothes and other purchases that aren’t necessities.
Use the extra money from your budget to pay down debt and put money into savings. You can make this easier by “paying yourself first,” or automatically directing a portion of each paycheck to a designated savings account. Then use part of that money to pay down any debt you’re carrying, and save the rest.
Eventually, you’ll want to have at least several months’ salary saved in case of an emergency, but you can work toward that gradually.
You may have it at work, so inquire with your human resources department. Find out (1) whether you have any coverage; (2) if you do, how much of your income it would replace in the event you became disabled; (3) is it short-term coverage, long-term coverage or both; and (4) how long do you need to be disabled before it kicks in.
If you don’t have disability income insurance through work, talk to a financial advisor or insurance broker to see whether you could qualify for a policy. But be careful and read the fine print to confirm the insurance is fair and appropriate before you purchase any.
Building an adequate emergency fund (see tip 2) could help bridge the gap between when you become disabled and when your disability income insurance actually kicks in.
Work with a financial advisor or advisory service to ensure your assets and any savings your parents have are invested appropriately. Investing advice isn’t just for the wealthy. Everyone who has investments needs to take care of them, no matter how much or how little you have. Put yourself in a position to earn returns and beat inflation without taking inappropriate risks.
Find a service or individual with whom you’re comfortable. A good investment advisor will help you figure out your risk tolerance and investing timeline. They’ll use that information, combined with market conditions and your personal situation, to create an appropriate and diverse investing strategy for your money.
Your retirement may be the last thing on your mind as you try to juggle all your other expenses. But look at your parents. You can see from their situation that having more money during retirement can make some things easier and less stressful. Set yourself up for a low-stress retirement, without placing too much burden on your children, by saving for your own long-term future.
Contribute to your 401(k) plan at work. Start by contributing enough to receive your company match if they offer one. If not, begin by contributing as much as you can afford — aim for at least 6 to 8 percent of your salary to start with, and then try to increase your contributions by 1 percent each year.
If you don’t have access to a 401(k) plan, open an Individual Retirement Account (IRA) and make regular tax-deductible contributions.
By making these five resolutions part of your financial planning, you’ll not only help ensure your family’s financial well-being, but you’ll be better prepared for whatever might come your way.
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