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Having financial stability is not just about having enough money to buy the things you want; it’s about being able to weather the storm when economic situations take a turn for the worse.You probably remember the last financial recession. I don’t know about you, but that was a very difficult time for my family. Going through that type of situation when money and jobs were scarce, really reminds us of the importance of financial stability.
Even if your finances are not looking so good right now, there is no better time to whip them into shape. I’ve listed 11 tips you can use today to start improving your financial stability. They’ve helped my wife and I pay off $21,000 of debt in less than 6 months, and I’m sure they can help you too.
So let’s dive into it.
1. Analyze Your Current Situation
What are your goals? What do you want to save up for?
It’s important to know what state your finances are currently in, versus where you want them. That way you can develop an appropriate strategy and figure out how aggressive your financial plan will need to be.
Once you understand your financial situation, figure out how you got to that point. This step is especially important because you need to know what to not do in the future to avoid making the same mistakes again.
2. Set Your Financial Goals To Achieve Financial Stability
Knowing your goals will help you focus on saving money and paying off debt in the most efficient manner. After all, the ultimate goal is to gain financial stability as quickly as possible.
So what are your goals? Do you need to save for retirement? Maybe you are struggling with credit card or student loan debt? Perhaps you want to save up to buy a house, or just want extra money to go on bigger family vacations?
No matter what your goals are, goals are important to establish the right mindset to keep you laser focused on what you want to achieve. Make sure you write them down as then will help to move you from where you are now to where you want to be financially.
3. Create a Monthly Budget
A monthly budget is one of those necessary evils you have to establish if you want to create financial stability.
First, you should figure out what is your total monthly income. Then calculate your total expenses. Your income minus expenses equals your total available cash. If you don’t have much money left over at the end of the month, try to find ways to reduce your spending and save money.
Of course you won’t be able to cut back on everything. But you might be surprised at how much little purchases here and there start to add up over the course of a month.
Creating a monthly budget will help you keep track of how much you have available to spend and hopefully resist the temptation to make purchases that are not actually necessary.
4. Check Your Credit Score and Credit Report
If you have a less than perfect credit history, you probably dread seeing your credit score and credit report. But if you’re looking to establish financial stability, they are excellent tools to use. And on top of that, they are free every year.
You can get a free annual copy of your credit report at AnnualCreditReport.com.
A good credit score is an indication that you are on the right track. But you will also be able to check your report and make sure you are not taking a hit due to potential credit errors or identity theft. So make sure all of the information is correct.
5. Lower Credit Card Debt
Getting rid of credit card debt can be a struggle. The amount you pay in interest over time can really add up. If you have credit cards with high balances and interest rates, you may be losing thousands of dollars a year.
Not only do credit card interest payments take away more of your hard earned money, but credit card debt plays a significant factor in determining your credit score.
That’s why lowering your credit card debt is so important. Once you free up and take back that money you were losing, you can put it to better use and pay down other debts faster.
6. Set The Tone With The Right Mindset
Getting out of debt and creating financial stability is not something that will happen over night. It might even take years.
That’s why developing the right mindset is so important. You have to stay focused on your goals, even when you want to cave in and buy something expensive on credit. Remember, just because you could get a loan, does not mean you should.
You really have to fight off that buy now, pay later mentality and focus on your goals.
Even though it will be tough at times, trust me when I tell you that seeing that $0 balance on your loan statement will bring a smile to your face and make it all worth it.
7. Make Extra Money
If you’re currently living paycheck to paycheck it can be difficult to pay down your debt quickly to reach a point of financial stability. In order to get there faster, have you considered taking on a second job?
Maybe you can find a side hustle that will help ease the financial burden. A side hustle is a great way to make some extra money in your spare time. Having some extra money can go a long way in helping you reach your financial goals. To find out more about side hustles you can do for extra money, check out my article Side Hustles You Can Work From Home To Make Extra Money.
A little money from here and there can quickly add up, and before you know it, you’ve paid off another credit card, or increased your savings account. The more money you can make to put towards existing debt the quicker it will get paid off and the sooner you put more money back into your pocket. This gets you one step closer to financial stability.
Here are my best resources to help you make more money:
- Make Money with Proofreading Jobs and Work From Home (work online from home)
- Creating Your Own WordPress Blog on Bluehost (for starting a blog)
- Make Extra Money By Publishing Kindle eBooks (build online passive income)
- Make Extra Money With These 5 FREE Online Survey Sites (get paid to take online surveys)
8. Track Your Progress and Net Worth
Keeping track of your progress is very important to avoid discouragement. As I mentioned before, achieving financial stability will take time. Often it may feel like you’re not getting anywhere, or in some cases going backwards.
But it you keep track of where you were and compare it to how far you’ve come since you started, you’ll get some positive reinforcement. This may be just the boost you need to keep pushing forward.
It’s also a good idea to occasionally determine your net worth. As you get closer to financial stability, your net worth will be increasing. Net worth is a good judge of your overall financial health
To calculate your net worth, you simply figure out your total assets and subtract your liabilities.
Net worth = Assets – Liabilities
It’s probably a good idea to check this about every three months. You’ll be able to see if you net worth has been increasing or decreasing.
If you want to establish financial stability, measuring your net worth is a must.
9. Establish An Emergency Fund
As you’re going through the process of creating financial stability, it can almost be guaranteed that some kind of unforeseen money sucking event is going to occur. Maybe your car is going to break down, or a pipe bursts in your house (it happened to me).
The point is, that having a contingency or emergency fund set aside for these situations will prevent you from reaching straight for the credit card to pay for it.
The ideal amount for an emergency fund can vary depending on your income level. However, if you can set aside about $1,000 to $2,000 to start, that would help cover many unforeseen circumstances that might arise.
Even though it stinks to have to dish out money for unexpected expenses, having an emergency fund will help remove the fear of how you’re going to pay for it.
If you do end up dipping into your emergency fund, make sure to replenish it as soon as you are able; to help cover the next potential situation.
10. Start Saving For Retirement
Pretty much everyone wants to retire from working at some point in life. But you need financial stability to do it. That’s why it is important to start putting money towards your retirement as soon as possible. Not putting money towards my retirement sooner is probably one of my biggest financial regrets.
There are many ways to save for retirement. But a great way to start is with your employer’s retirement plan.
If your employer has an investment-matching program, it’s an excellent idea to invest up to the match amount if your budget allows it. Investment matching is so beneficial because it’s basically free money from your employer. It’s a great way to double your investment quickly.
11. Build Your Assets and Lower Liabilities for Financial Stability
If you are going to build financial stability, knowing the difference between assets and liabilities is a must. Financial expert Robert Kiyosaki states that assets are the key to building real wealth.
Essentially, an asset is something that will have a future economic dollar value. It can be anything that is tangible (something you can physically touch) or intangible (can’t be touched) that is owned or controlled to produce some form of positive economic value. So, an asset puts money in your pocket. Some examples of assets are cash, inventory, land, and investments.
A liability is defined as a future sacrifice of an economic benefit that you are required to make to someone else as a result of a previous transaction and may result in the transfer of assets.
In simple terms, this means you decided to sacrifice some of your future earnings because of something you wanted or needed and took out a loan or a line of credit. You are sacrificing something else you could have used that money for in order to pay your debt. Basically, a liability takes money out of your pocket.
To build wealth and financial stability your assets have to be greater than you liabilities. In other words, have more money going into your pocket than going out.
The road to financial stability may not be an easy one. Depending on your current financial situation, it may take years to achieve. However, keep in mind what the end result will be. Remember why you are doing this and stay focused. Your hard work will be totally worth it!