The current economic climate is tough for everyone. There are multiple people who have never experienced financial instability, or if they have, it was for a brief moment in time, and then things recovered. Financial stability is something that takes time to build. It is an ongoing process and cannot be achieved overnight. If you want to achieve financial stability, there are 12 things that should be in place:
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1) A positive attitude
When you feel like your back is against the wall and you have nowhere to turn, this is when your strongest work ethic needs to shine through. There has been no point in history where a negative attitude helped anyone solve their problems. It can take time for solutions to present themselves, but as long as you keep working hard at finding those answers, they will come.
2) Have a realistic budget
Your first step should be creating a realistic monthly budget for yourself, which will help you make sure you are spending your money on things that are necessary and not what you want at the moment. You’ll need to figure out where all your money goes every month, track it for about two months, see how much money comes in after various bills have been paid (including rent/mortgage), then calculate how much money is left over each month once everything has been paid off. If you find that there isn’t enough money leftover or if there’s too little money, you’ll need to cut down on spending in some areas.
3) Create an Emergency Fund
An emergency fund should have at least three months of your income set aside so that if something comes up – say, a sudden illness or car trouble – you won’t have to borrow money from anyone else, and the borrowing interest rates could be costly. Create this fund while still keeping it within your monthly budget limits.
4) Start investing early
The earlier you begin to invest, the better it’ll go for you in the long run (especially since compound interest is real). While saving for retirement may seem like a really far-off goal into the future, it’s not too late (and never will be) to start putting money away. Not only will starting early help out your future self, but any extra money you may have left over after you’ve started your emergency fund and budget can go straight into investments so that it has the chance to earn interest.
5) Keep an eye on debt
The most important thing for financial stability is knowing everything about your debt. This includes knowing how much credit card debt you currently have, in addition to student loan or car loan debt (if applicable). Knowledge is key in this situation because it allows you to be proactive in finding ways to pay off your creditors during times when more cash becomes available (like when you get a raise at work). If there are certain debts that cannot be paid off with money that becomes available, you may need to sell something like a car in order to get more cash.
6) Get rid of credit card debt
This is very important because it will save you on interest rates; whatever monthly payment you make towards your credit card bills (if any), if the interest rates are extremely high (20% or higher), try using the excess funds in your budgeting to make an extra payment each month so that you can pay off your debt sooner. That way, you won’t have to pay as much interest fees over time, and everything will go a lot smoother financially.
7) Save for retirement early
Just like starting to invest early pays off over time, so does beginning to save for retirement early. It’s important to note that you should be putting money into 401(k)s and not standard savings accounts (or other types of investment vehicles like stocks or bonds). Your company may match your yearly contribution, which would make it even more beneficial for you to put in the maximum amount every year.
8) Avoid using credit cards
If you follow rule number five and get rid of your credit card debt while staying within a monthly budget, this will help out tremendously with avoiding credit card use because it’ll become harder for you to purchase things that go beyond the limits of your budget. Credit cards are not easily paid off; while they can come in handy at times, they’re extremely dangerous if not handled correctly.
9) Always pay bills on time
This seems like an obvious tip, but it’s still very important that you always make sure to pay your bills before the due date (or any outstanding late fees that may apply). If you miss a payment even once, it can be extremely detrimental in the long run because some creditors report your account history to the credit bureaus; this information is taken into consideration when calculating your credit score. Missing one or two payments here and there won’t necessarily ruin things for you, but consistently paying after the due date will definitely do no favors for your credit score down the line.
10) Don’t go too far into debt just to buy a home
Owning a home may come with some tax advantages, but it’s not worth going into tons of debt for. Before you purchase your dream home, make sure that you have an emergency fund established (no less than three months’ worth of expenses saved up) and that you can afford the monthly cost on top of all other bills. Housing payments are usually more expensive than anything else, so just because something is in your price range doesn’t always mean it’ll be easy to pay for each month.
11) Learn how to invest!
There are many ways to learn how to invest or become more financially stable while also investing; you can go online to read articles/blogs if you don’t want to sign up for a course. It’s important to learn how to be financially stable because it’ll help you in the long run; you’ll be more likely to accomplish your goals and dreams without unnecessary stress weighing down on you each month (such as debt and bills).
Typical investments are:
- Stocks: It’s kind of like betting that the money you’re investing in will go up in value over time, so if you invest $5,000 and your stocks increase by 10%, then $5,500 will be available for you to withdraw.
- Bonds: They tend to fluctuate less than stocks (or decrease at a slower rate).
- Real Estate: It’s probably the least risky investment there is, and it has a high return as well (but also takes up more of your time than just investing in stocks or bonds alone). However, if you’re not sure how to do this on your own, you can always hire someone else to manage it for you.
12) Life insurance is a must
Life insurance is a must because it’s the key to helping your family get over a loss of income or financial stability if something were to happen to you. If your children are young, life and disability insurance will help them have enough money for their school/daycare expenses so that they can stay on track with their education. It may be difficult to think about this kind of thing, but if anything ever did happen, you’d want your loved ones to have the necessary funds in order to get by until things improve.
There are many different ways that you can become more financially stable right now, and these ten tips will help immensely. It’s not something you want to put off for later on because it’ll be a hassle when the time comes. In this day and age, technology allows us to do more things with our money than ever before; taking advantage of those opportunities is crucial!
Best of luck in becoming a financially stable individual! Once you start practicing all the strategies mentioned above, you’ll find your financial situation drastically improving over time!