4 Steps for Long-Term Financial Stability

Table of Contents:

  1. Pay Off Debt
  2. Tailor Living Space to Your Lifestyle
  3. Make Smart Investments
  4. Prepare for the Worst

As Social Security benefits dwindle and the dreaded retirement savings gap strikes fear into the hearts of the aging working class, the prospect of a comfortable retirement appears to be becoming more of a pipe dream for the American populace.* Though predicting your financial future is virtually impossible, the unexpected hurdles of old age can be averted with adequate planning and investing, empowering the shrewd saver to build a safety net out of discretionary income earned while still in the workforce.

Here are 4 tips to foster long-term financial stability and compose a suitable budget for an uncertain future:

Pay Off Debt

The first step in preparing for a worry-free retirement is settling your debts, specifically those with a high balance. Credit card payments should be your primary focus and exceeding the minimum payment to the best of your ability is the quickest way to circumvent mounting interest. You’ll also see an improvement in your credit rating and an ever-expanding emergency fund, though any future credit-card spending should be limited to moments of crisis.

Personal loans and medical bills should also be handled in this fashion, but don’t allow your focus on potentially toxic debt to distract from fixed expenses, which can balloon in cost due to involuntary neglect. Take advantage of in-home energy check-ups provided by your local utility services, which can provide lessons on optimizing utilization and recommendations for home improvements, and find ways to minimize cellular service costs to accommodate your usage.

It’s also beneficial to stay abreast of your monthly bank statements,reviewing each expenditure and locating any unnecessary subscriptions that are due for cancellation.

Tailor Living Space to Your Lifestyle

Are you planning on spending your retirement with your nose buried in a good book or toes buried in the sand? Either way, you’ll need to tailor your living space to your prospective lifestyle, no matter how modest.

A great second step for any long-term financial plan is to access your property and possessions and determine what needs to be replaced or upgraded down the road. Homeowners should consider the mortgage cost, size, and maintenance required for their residency, keeping in mind the limitations of an aging body and a lack of employment-based income. Downsizing not only lowers costs, but can provide a more manageable and organized living space, freeing you up for more leisure time at home or on holiday.

If the physical strain of home maintenance is a concern, moving into a senior living community can provide the safety and comfort of a private residence without the labor and responsibility. Getting the staff to handle your housekeeping and hedge trimming not only frees up your schedule for travel, but it can also help consolidate costs, since most senior communities include utility bills, laundry, and transportation in their monthly fee.

Make Smart Investments

Investing your money can be a quick and painless way to capitalize on disposable income, but sticking to one strategy or hastily spending on trending stocks can leave you and your beachbound summer plans high and dry.

Mutual funds are a sensible alternative to taking the stock market head on, since a professional broker will manage spending on your behalf and seek the lowest risk opportunities with the potential for the highest return. Obviously, brokerage fees can cut into your profits, but professional oversight is worth its weight in gold, considering the knowledge and foresight it takes to move money between individual securities (either equities or bonds) on a daily basis.

This liquidity (the freedom to buy and sell) is unique to mutual funds and allows the investor or their representative to sell without being subject to penalties and redeem earnings in a single day. It’s a surefire way to diversify your portfolio without the responsibility or risk of playing the stock market.

Prepare for the Worst

Per the World Health Organization, 21st Century humans are living longer than their ancestors, but struggling with poor health as they venture into their golden years.** Considering your welfare as a senior citizen and the costs surrounding your demise can be a distant and troubling prospect, but preparing for the inevitable is the only way to secure a stable future for yourself and your family.

Eligibility for Medicare can ease some of the stress surrounding declining health, but 20% of your medical costs may have to be covered out-of-pocket, and hospital visits can accumulate costs well into the thousands for extended stays.*** Long-term care insurance can act as an ideal back-up plan for those without familial support, providing personal care and covering nursing-home fees for patients over 65 with chronic disabilities. Though the policies can be costly (and steadily rising in price as the policyholder nears 60), the premiums are deductible and the peace-of-mind is worth every penny.

The last line of defense in your long-term plan should be final expense insurance. Covering everything from funeral costs to interment fees, this security requires no physical autopsy or cause of death, paying out to your beneficiaries as long as premiums are up-to-date.

It may seem like a morbid closing step on your path toward financial stability, but you’ll rest easier knowing that your final days aren’t a strain on your family’s assets.

* AARP, (April, 2019). How much longer will Social Security be around?. AARP. Retrieved September, 2019
** World Health Organization, (2015). World Report on Ageing and Health. World Health Organization. Retrieved September, 2019
*** Anonymous, (2019). The Advantages and Disadvantages of Medicare. Medicare Supplement. Retrieved September, 2019