A periodic checkup of your financial health will help to prevent future problems. Freezing your credit will go a long way to protect you from identity theft, while budgeting and retirement planning are important ways to stay on the path towards overall financial health.
Freezing Your Credit
A credit freeze, or security freeze, restricts access to your credit report. This can help protect you from fraud if you suspect your identity or personal information has been stolen. A credit freeze doesn’t affect your credit score or current credit accounts. A credit freeze lasts until you remove it. You can still apply for a job, rent an apartment, or buy insurance. However, you’ll need to temporarily lift the freeze to open new accounts or to allow access for specific creditors.
To freeze your credit, you need to contact each of the three major credit bureaus: Equifax, Experian, and TransUnion. You’ll need to provide your name, address, birth date, and Social Security number. A credit freeze is the easiest and cheapest way to protect yourself from identity theft. However, you must unfreeze it when you want to apply for new credit.
Budgeting
Pay attention, but don’t panic. There has been a constant stream of negative stories in the news and online about the state of the economy. Pay attention to what’s happening but refrain from getting caught up in doom-and-gloom, which can lead to bad financial decision making.
Identify your financial stressors. Take stock of your particular financial situation and what causes you stress.
- Write down specific ways you and your family are handling everyday finances
- Always keep and emergency fund
- Communicate with your service providers
- Determine what loan programs are offered
- Find local community resources
- Negotiate bills in collections
- Seek out a legal advocate for larger concerns
- Speak with a consumer credit counselor
Remind yourself that you’re doing the best you can.
Retirement Planning
The average American spends roughly 20 years in retirement. Retirement is expensive, experts estimate that you will need 70 to 90 percent of your preretirement income to maintain your standard of living when you stop working. On average, Social Security retirement benefits only replace 40 percent of pre-retirement income. Start by estimating your benefit by using the retirement estimator on the Social Security Administration’s website or call 1-800-772-1213. To make sure you have enough money for everyday and unexpected expenses in retirement, it’s never too early to start saving.
How you save can be as important as how much you save. You can put aside more by diversifying when you save money. By splitting up your savings and investing in various places you are more likely to reduce risk and improve return.
One option is to contribute to your employer’s retirement savings plan such as a 401(k). Your taxes will be lower, your company may match a certain percentage, and automatic deductions make it easy. Over time, compound interest and tax deferrals make a big difference in the amount you can accumulate. Find out about your plan. For example, how much would you need to contribute to get the full employer contribution and how long would you need to stay in the plan to make withdrawals.
If your employer has a traditional defined benefit pension plan, check to see if you are covered by the plan and understand how it works. You may also have a plan from a previous employer or are entitled to benefits from your spouse’s plan. For any savings plan, ask for an individual benefit statement to see what your benefit is worth and learn how your savings or pension plan is invested.
You can also put up to $6,000 a year into an Individual Retirement Account. If you are 50 or older you can contribute more. You can also start with much less. IRAs provide an easy way to save. You can set it up so that an amount is automatically deducted from your checking or savings account and deposited in the IRA.
Remember, if you withdraw your retirement savings early you may incur penalties.
If you are stressed with your financial situation, contact your Employee Assistance Program (EAP) for confidential counseling.