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  • Writer's pictureWing Chan

5 Steps to a More Financially Secure Future

Updated: Oct 10, 2023

Achieving financial security doesn't happen overnight, but you can take steps to protect your family today and make plans to provide for them in the future. Here are five important tips to help you along your way.

1. Get life insurance

Life insurance can provide your family members with the resources to maintain their lifestyle when you die. It can replace some or all of your income, pay off debts like a mortgage, and cover funeral costs. It can even help fund longer-range needs like college tuition or your spouse's retirement. And keep in mind that life insurance isn't just for income earners. A stay-at-home parent provides vital services that would be expensive to replace, like childcare and managing the house. How much and what kind should you buy? If you have a young family, a rule of thumb is to buy at least 10 times your gross annual income. Term insurance is often a good choice for young families on a tight budget because it allows you to buy the most coverage for the lowest initial premium. If you have budget flexibility, you might want to have some permanent insurance, too.

2. Start an emergency fundAn emergency fund is the money you set aside for unforeseen expenses, such as unexpected home or car repairs. Most financial professionals recommend you keep three to six months of expenses in a liquid account, but it takes time to accumulate those funds. Even a small amount each week can help you get there. One approach is to instruct your bank to automatically transfer funds to a separate account that you'll save for emergencies: $25 a week will give you $1,300 in a year.

3. Make a willIt's hard to imagine you won't be around for decades to come but don't use that as an excuse to not set up a will and keep it updated. A will allows you to specify how your assets will be distributed, who will make sure that your wishes are carried out, and, most importantly, who will be the guardian for your minor children. Without a will, the state could decide who gets your children.

4. Protect your paycheck with disability insuranceStatistics show that just over 1 in 4 of today's 20-year-olds will become disabled at some point in their career. If you were unable to work due to an illness or injury, your family would lose your paycheck, but they'd still have financial needs. Disability insurance can replace a portion of your lost income, typically 50% to 70% of your earnings, helping your family make ends meet until you're able to return to work.

5. Think long-termThe best time to start saving for long-term goals such as college or retirement is when you're young. For retirement, enroll in your company's 401(k) plan, if one is available, and take advantage of "matching funds", which match your contributions to a certain limit. Ignoring matching funds is like refusing free money, and your contributions will lower your taxable income. For college savings, consider opening a 529 plana tax-free savings option. You can instruct your institution to make regular, automatic deposits from your bank account, so you don't have to think about it.

There is no better place to start preparing for your family's long-term financial future than buying life insurance. Sproutt insurance advisors are available to help you determine what kind of life insurance is best for you. Simply answer a few questions and we will find the best-value plan for your lifestyle, needs, and budget.

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