It’s safe to say that everyone wants to live a comfortable life-one in which they do not have to worry about where their next meal will come from, if this is the day they get kicked out of their house, or the dwindling amount of money they have left in their bank account. One way of becoming a truly independent person is when you are financially stable. Some crucialadvantages to being financially stable include better physical and mental well-being to provide for your basic needs. Financially stability also means that you can pursue more career opportunities, provide for your family better, and save up for retirement.
Unfortunately, the truth is that many people struggle with getting their finances under control. That’s not something to be ashamed of. But if you want to end the cycle of constantly worrying about your finances, then it’s time to be proactive. Take the time to learn how to take back control of your finances. If you do not invest the time and effort into working on your finances, no one else is. Consider the following advice below as stepping stones toward financial stability.
Get the Bigger Picture
If someone were to ask you right now, “What is the current state of your finance?” how would you answer them? If you can’t track where specifically your income is going, it’s time for you to sit down and do the math. One of the first steps to financial stability is knowing where you get your money and what you spend it on. With the day-to-day expenses you incur, sometimes it might come as a surprise to you that you’re spending a lot more on non-essentials. And then you wonder where all your money went at the end of the month. To make things easier, consider downloading an expenditure tracker app that helps show you through charts or pie graphs where you spend your money.
Once you have an idea of your spending habits, you need to prioritize. This is where most people run into financial troubles. The inability to control your spending or prioritize your essentials means you spend things on non-essentials and are left with little to nothing for bills and loan payments. Make sure to pay off your bills and loans first, along with setting aside a small amount for savings and investments. What’s left of your money once you’ve taken care of your essentials (and this also considers your groceries and rent), you can spend on whatever you want. Experts do not recommend taking out loans (such as credit) to finance your lifestyle. You will simply be digging yourself deeper into a financial hole. Practice living within your means.
Work on Financial Literacy
“Knowledge is power,” as the saying goes. Knowing more about a problem helps you find ways to solve said problem. And this can come into play with your financial struggles. Understanding how you spend enables you to make a structured budget tailor-made for your circumstances. Understanding the financial jargon you encounter when you borrow money or pay back your loans helps you make more informed decisions. You can regulate your expenses better, leading to less anxiety and stress over your finances. These are all just some benefits of becoming financially literate. Don’t be intimidated by concepts like investments, mortgages, loans, and insurances. There will be professionals to help you along the way. But to avoid worst-case scenarios such as getting scammed, it’s best to read and understand interest rates, risk mitigation, price levels, etc.
When the wordinvestmentcomes up, many people immediately think of the stock market. And the thought of understanding the stock market with its many foreign concepts such as portfolios and asset allocation. Diversification has many people balking at the idea of investing in it. But the stock market is not the only option to grow your money. Creating a small business, flipping houses, or monetizing on a hobby or two are other ways you can invest your extra money. Some of these ventures might need capital or seed money for you to start with. So consider researching loan opportunities for small businesses or taking out a hard money loan when you start flipping houses.
Have a Safety Net
Lastly, the need for an emergency fund can never be understated. Having a financial safety net for the rainy days when you run into situations you didn’t budget for will take a load off your mind. Set aside a small amount of your income every month to put in your emergency fund. You should not use this unless you encounter a real emergency, such as a medical issue or job loss. Having savings you can use in times of dire need will help give you more options and stave off the need to take out yet another loan. The rule of thumb for emergency funds is that you should have enough money in it to live for at least three to six months if you have no other source of income.
Financial stability brings stability to your life. Learn ways you can invest your money, do not take out loans to fund a lavish lifestyle, and make sure to have a safety net for the hard times. Do all these, and you’re one step closer to the life you envisioned for yourself.