How to Build Financial Security for You and Your Family

Building financial security for your family is about insulating yourself against risks and potential emergencies.

If an emergency were to strike tomorrow—be it a medical emergency, a major house or car repair, or even losing your job—would you be ready? Having a contingency strategy in place for if your best-laid plans go awry is vital to protecting your family and avoiding dire financial straits. Here are a few best practices for managing money and home/family assets that will help shield you from a potential financial fallout.

• Put money away in a “rainy day” fund

Get in the habit of setting aside a little money in a savings account each month. How much you save will depend on your financial situation and the amount of money you have left over after paying bills and other living expenses. Whether it’s $100 a month or $1,000 a month, every little bit helps. Over time, your “rainy day” fund will grow, thanks to both additional deposits and dividends from your savings account. Joining a credit union such as Resource One can help on this front. One of the biggest credit union membership benefits is that you typically get significantly higher Annual Percentage Yield (APY) with a credit union than with a traditional bank. Where banks prioritize their stakeholders, credit unions are member-owned, which means the account-holders are the stakeholders.

• Work on building home equity

While buying a home is a big investment, it is also usually a smart investment. Your monthly mortgage payments will go toward building your equity, which adds to your overall net worth and can offer some extra security in a financial emergency. Obviously, you will build home equity just by paying your mortgage, but you should also strategize on how to add equity to your home above and beyond those payments. Making improvements to your house is a good way to grow its value, increase its resale potential, and grow your equity. Add a fence; install a new driveway; replace the roof; redo the kitchen; add an extra bedroom. If and when you decide to sell your house, these improvements will help you sell it for considerably more than you bought it. Outside of growing value, you can always refinance your mortgage to help you out in certain financial situations. 

• Accumulate assets; avoid liabilities

Think of “assets” as anything that accumulates value or produces income over time. Think of “liabilities” as anything that depreciates or loses value over time. In this equation, assets might include stocks, bonds, a successful business, rental properties, or even your house. These assets grow in value over time and/or produce regular income for you. Examples of liabilities include cars, cellphones, boats, electronics, and furniture. These items start losing value the moment you buy them. In some cases—such as a boat or a cellphone—you need to keep paying month after month, even as the item loses resale or trade-in value.

Avoiding liabilities entirely is impossible: phones and cars are essential for many people. However, what you should do is think about this “assets vs. liabilities” dichotomy any time you are considering an investment or purchase. Sure, you could go out on Black Friday and buy new TVs for every room in the house, but do you need them? You might do better to invest that money in your business or put it toward investments that will accumulate wealth over time. By the same token, doing what you can to get as much value as possible out of your liabilities will turn those items into more lucrative investments. For instance, you might hold onto your paid-off vehicle for a while or use your iPhone for four or five years (rather than trading it in for an annual replacement). These cost-conscious practices seem small, but they will keep your family free of unnecessary debt or expenses, without drastically impeding quality of life.

Work with Resource One Credit Union to Grow Your Financial Security

What are appreciating assets? Which accounts are best for saving money? What are credit union membership benefits? At Resource One Credit Union, we can help you answer these questions and others. As you work toward building financial security for your family, our credit union can help you get the job done with family-friendly, customer-focused financial services. Contact us today if you are interested in learning more.