I've never been a big fan of riskier investments. However, as I get older, and learn more, I've begun to realize that I'm never going to "hit the jackpot" so-to-speak if I don't take a chance occasionally. While I'm not talking about betting the family nest egg in Vegas or anything like that, but as we've become more financially stable, I think it's worth taking a well-calculated risk here and there when the opportunity presents itself. The following are some of the steps that we've taken as a family to prepare ourselves for taking a few investment risks.
Paying off Student Loans
Getting the drop on our student loans helped us save money later in life. By paying off nearly $50,000 in student loan debt in less than three years, we cut off thousands of extra dollars in interest that we would have had to pay over the full terms of the loans otherwise.
Staying Debt Free
Once we were free from student loan debt, we ensured that we remained debt-free when it came to credit cards or personal loans until we undertook our mortgage. With credit card interest rates often in the double digits, while we used a credit card, we made sure that its balance was paid off each month.
Paying off our Home
Finally, we decided to go back into debt (some would consider it good debt) to buy our home. However, our being debt-free in other areas of our lives allowed us to put a bigger downpayment on our home as well as put more money toward our mortgage. Therefore, when we eventually sold that home and downsized to a smaller place, we took the equity from our home and used it to purchase a place outright.
Funding Retirement Accounts
Throughout our remaining debt-free, we managed to fund our retirement accounts. While we didn't build huge account balances in there areas, we put in enough to get the matching amounts from our respective employers and put much of our account balances into funds that would continue to grow through dividend reinvestment with or without continued regular contributions.
Creating an Emergency Fund
Through the entirety of our debt pay-down and mortgage payoff, we maintained an emergency fund. While this amount has fluctuated over time and with our various financial situations, as of late, we've worked to maintain a $5,000 cash emergency fund in our checking account. This way we're reasonable well prepared for any unforeseen situation that might come along requiring additional funds other than those we've budgeted.
All these steps have helped us keep our costs down while building certain financial reserves like our home, emergency fund and retirement accounts into our lives. With these backups in place, we can now begin to look to diversify into a few riskier investments that may or may not pay off down the road.
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The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.