Most people are only motivated to make smart financial moves when things are economically crashing down. That is not a healthy habit. When things are already bad, your moves will probably be done out of desperation. Instead of thinking about your choices, you have to make do with what little you have. When you start making desperate moves, there is a very high chance that things will not go when you intend them to.
If you really want to be smart about your finances, you should not let the economic situation dictate your financial moves. In fact, you should be doing more to improve your finances while the economy is doing well. You should not wait until it is too late. While there is still plenty, you need to make sure that it will be used wisely.
According to a recent survey, more Americans feel like the economy is “excellent” or “doing good” right now. That means if you need to think about the best financial moves to improve your finances, now is the right time to do that.
Learning how to make smart financial moves is probably the best skill that you can have. The truth is, being successful with your finances does not entirely depend on how much money you earn. It is more dependent on how you choose to use the money. You can start by earning a low-income and still end up a financial success after a few years time. It is also possible for you to earn a 6-figure income and still end up ruining your financial future.
Knowing how to make the right financial choices can impact your life in ways that you have never imagined. But the question is, what exactly are these moves that you need to do?
Financial tips when the economy is booming
What does a booming economy mean?
When someone says the economy is doing well, that means wages increase and there are enough jobs for everyone. It is also when productivity and sales are high. Given the fact that people are spending more and have started to become aggressive in using credit, it is safe to assume that they are using their finances with confidence. And when there is confidence in personal finances, there is an underlying confidence in the economy as well.
Of course, you have to remember that when the economy is great, something always happens after. Usually, inflation is something that takes place after an economic boom. That means prices will rise. That is a good enough reason for you to strengthen your finances while you still have the chance. There are three smart financial moves that you need to consider doing.
Take advantage of an income increase
If the economy is doing well, that means most companies will be profitable too. This may be a good time to think about increasing your income. This can be in the form of a career shift, promotion, side gig, etc. If you do not like your job, you can consider shifting to a new one. When a company is doing well, there is a high chance that they will be expanding. That means more jobs and more opportunities to pursue a new career. If this change in your career can help you earn more, you have to take advantage of that. Of course, you can stay with your current employer. But you can discuss getting a raise if you can prove to your employer that you deserve it for your good performance.
Be smart about your extra money
When you have all the extra money, it is important for you to decide carefully how you should use it. Since the economy is doing well and business is good for the company, that means they will be more generous. If you do get a raise, you need to be smart about where you will put that money. If you get a commission or an unexpected bonus, you have to know what you will do with that money. You need to be wise with your choices. There are many smart ways to use your extra funds. You can use it to pay off your debts. You can also save up for a down payment of a house. While the extra money can be used to reward yourself, do not spend all of it. Do not be quick to upgrade your lifestyle. If you have to reward yourself, make sure it is a move that will help increase your personal net worth.
Increase your investments
One of the smart financial moves that you can do to invest your extra money. If the economy is helping you earn more, you can bet that it will also help you earn through investments. This does not necessarily mean you have to buy stocks and bonds. If the value of the stocks is high, you should not buy for now. But this is not the only investment that you can make. Paying off your mortgage is a form of investment. After all, every payment you make towards it will go the equity of the property. That will increase your net worth.
You can also consider increasing your value by learning something new or improving your skill. Investing in yourself is usually a good thing to do. This is not really a financial move but it will help you in the future. If the company you work for is doing well, they may be able to finance this for you. While they will expect you to use this for the benefit of the company, it increases your value and you can bring that with you wherever you go.
Make sure your finances are recession-proof
As you take advantage of the financial benefits that come with having an economic boom, there are other smart financial moves that you can do. One of them is trying to make your finances recession-proof.
According to the Federal Reserve, the Great Recession was actually the longest recession that the country had to go through since World War II. This made this particular economic situation severe and destructive. There is no saying when the next one will happen. To make things worse, there is no guarantee if it will be worse than the last recession or not.
Because of this uncertainty, you need to make sure that you strengthen your finances to make sure that it can survive another recession.
Here are some of the things that you should do.
Give your emergency fund a boost
Start by making sure you have enough emergency fund. Having this fund will always be one of the smart financial moves you can make. This is something that you should have – regardless if the economy is good or not. This will help you survive an unexpected expense that you might encounter.
Work on your credit score
According to statistics, the national credit score average is quite high – 700. This is a good sign. If you have debts and you have committed to paying them off, that will help build your credit score. But even if you do not have one, you should still continue to use it. Your credit cards can be used to make purchases and if it is paid off in full at the end of the month, you do not have to worry about paying interest on it. The great thing about keeping your credit score high is the fact that you get a chance to be given a low interest on loans that you will apply for in the future. While it is not ideal, it can be an additional source of financial security when your emergency fund runs out.
Live below your means
Some people will say that you should live within your means. The truth is, that is not enough. Living below your means guarantees that you have the extra money to either save or invest. Both will help improve your financial position.
There are other smart financial moves that you can do but the bottom line is, you need to start developing the right habits. Financial management always goes a long way and it becomes easier to do as long as you have the right mindset about your money.