In today’s capitalistic world, being financially stable gives you more options in all aspects of life. The amount of money you have often determines what you can do or the goods and services you can access.
Since money is a scarce commodity, you need a clear-cut strategy to help you build up your wealth. No matter how much you make, if you don’t have a strategy you will end up living from paycheck to paycheck and thus suffer if your income is terminated, or if you get an urgent emergency.
It is best to create a personal financial plan but you can always borrow ideas that have been proven to work. We discuss some actionable tips that you can implement as you seek to attain financial stability.
Keep track of all of your money
You will not achieve financial stability if you do not know how much money you earn and how much you spend. Create a simple ledger indicating your source(s) of income and what you paid for in the last one month. Include even the things that appear too cheap to have an impact.
Go through the ledger and identify the expenses that you could have avoided. You will also notice the tiny negligible expenses that have become regular in your list. You can then decide whether to keep them or not.
Keeping track of your money will also help you identify if you are earning enough. If not, consider looking for greener pastures or taking up a side hustle. However, no matter how much you are earning, your expenses should be less than the income.
Create a budget
The budget is your major guideline to living within your means. A budget will also help you allocate enough cash towards your important projects or purchases. As you continue funding the things that are important to you, you make progress towards your goals which creates a sense of fulfilment. In this way, a budget is your key to being happy while you strive to be financially stable because it guides you focus your resources on what matters most.
Creating a personal budget today is very easy. You can draft one yourself on your PC or notebook. If you want a slightly sophisticated one, there are various free budgeting apps that you can download to you mobile phone to get started.
Pay off debt and loans
Start your journey towards financial freedom by ridding yourself of the burden of existing direct lenders loans. If you have more than one loan, you can use different approaches to pay them. Pay all the loans simultaneously if you can. If you can’t, pay them systematically beginning with the one with the highest rates.
You can also consolidate your loans by taken one big loan to pay off all your current loans then continue repaying big loan only. However, be careful when consolidating your loans. Make sure that the terms of the new loan are better than the accumulated conditions of the existing loans.
Clearing your loans is important because it will improve your credit score. Your loan limit will subsequently increase allowing you to borrow substantial amounts for emergencies or big projects.
Short-term safety net
Many people in developed countries live from one paycheck to the next. Sometimes the income is not enough and they have to take up payday loans in case of emergencies. If you are in this situation you’re nowhere near financial freedom. You could easily end up in the streets if you lose your source of income or suffer a major emergency.
Cushion yourself from such scenarios by setting up an emergency fund account. Try to ensure that the account has enough money to sustain you and your dependents for at least one month.
You have budgeted your income, repaid your loans and set your safety net. The next step is to start saving. This is not to be confused with saving for a safety net. The amount saved in this step is meant to fund your goals or the investment opportunities that you may come across.
If you find it hard to set aside some cash to save after receiving the paycheck, you can ask your employer to split your paychecks deposits. Having a separate savings account will also allow you to monitor the amount saved against the target amount.
You have already set your foundation for short term financial stability. The next step is to think about the long term and you can only do this through investing. Investing in assets will not only give you long-term stability but also increase your financial net worth. Quality assets can actually be used to secure your loans in future.
Investments can boost you towards prosperity or set you back. What matters is what and how you invest in it. Take your time to learn about investing and consult widely.
Once you have decided what you want to invest in, you may use your savings or borrow a loan. If your credit score has already improved and limit increased, you should be able to secure a substantial loan. But ensure it is an amount you can repay comfortably with your income.
Commit yourself to live within your means
It doesn’t matter the effort you put in implementing the other tips on attaining financial stability. If you are spending more than you earn, you will never become financially stable. This requires many sacrifices.
Commit yourself to make those sacrifices and explain to your family why it is necessary. You might even explain your commitment to your high-spending close friends and relatives. Cut them off if they don’t understand. The aim is to sacrifice instant gratification in order to attain long-term fulfillment.
Attaining financial stability does not come instantly or easily. It takes time, sacrifices and sustained financial disciplined. However, when you finally get to be financially stable, you will attest that it was worth every bit of sacrifice you made.
Yes, the money will not buy you happiness. But being able to afford your family’s basic needs, to pay for their insurance and fees, and to know that you are in total control of your financial is fulfilling.