Recently the market watchers rejoiced because the Nasdaq hit over 5,000 (the first time it has done so in 15 years!).
While we celebrate the economic recovery, what is more important to you as an individual however, is where you stand in terms of your own financial stability.
Are you still living paycheck-to-paycheck; just only a car break away from bankruptcy?
Do you live in constant fear that if you missed one more payment, the repo man will pay you a visit?
Are you stressed out that you do not have anything to fall back should some financial emergency arises?
If you’re not happy with your finances, it’s likely that greater financial stability will have a major impact on your sense of well-being.
These steps will help you build financial stability in your life:
1. Understand your income and expenses.
Track every cent you spend and make for at least a month. You’ll be surprised where all your money is going. Seek to move in a positive direction with your spending.
- It’s important to know where you are now. List your assets and debts. Sometimes that may be hard to swallow, especially when you have very little assets but huge debt load. But trust me, knowing where you stand is way much better than living in a fantasy land.
- How much can you cut back on your current spending?
What can you do to increase your income? A little more money each month can add greatly to your financial stability.
2. Strive to be debt-free:
Imagine how much easier your financial situation would be if you didn’t have any debt. It doesn’t require a lot of income to live well if you’re debt-free.
The average interest rate on credit card debt is nearly 15%. That’s better than the best investor can average in the stock market. High-interest debt is like a hole in your bank account that never stops leaking. Start by paying off those high-interest rate loans.
- When the high-interest debt has been eliminated, shift your focus to all the other debt that are still left.
3. Build an emergency fund.
Experts recommend maintaining an emergency fund worth 3-6 months of your expenses. That’s a challenging figure for most families. However, even just $1,000 can remove a lot of financial pressure. This will make the inevitable trip to the emergency room and the unexpected car repair much easier to absorb. Emergency fund is a great cushion in maintaining financial stability.
4. Save for the future
Contribute to one or more retirement accounts on a regular basis. Just $100 invested each month can eventually grow to over $100,000 in 30 years. Speak with your human resources department at work. They’re the experts regarding your benefits. If you’re self-employed, you still have several excellent options, too.
- A little bit of money can grow into a lot. Avoid becoming discouraged by your current cash flow situation.
5. Think before you buy
Buying without thinking can create a long-term financial problem for you.
- Set spending limits and stick to them. Before making large purchases, take a few days to think them over. You’ll often find the urge will go away if you can put some space between the urge to spend and the act of pulling out your wallet.
- How many big purchases have you made in the past that turned out to be disappointing? It’s a common phenomenon.
Don’t be shy of returning things that you bought and realized you really don’t quite need. Most stores will give you 30 days window. Use it!
6. Set goals
Everyone knows that setting goals is important, but hardly anyone does it. Set short-term and long-term goals. Set aside a few minutes each week to review your progress. By reviewing your goals and your progress on a regular basis, you’ll find that achieving them becomes much easier.
Learning is one of the important steps you can take toward financial stability. You must be financially literate.
You must know how to read your credit report and your financial statements. Read up financial literature.
- The more you learn, the more your earn.
You can achieve financial stability by making incremental moves in the right direction.
Spending less and saving more is the name of the game.
Get started today by taking a small, but significant, step. Regardless of your starting point, you can achieve financial stability!
Think of how your life would be different if you no longer had to worry about your finances?
It’s been proposed that happiness is what’s left after all the negative aspects of your life have been removed. Take action to resolve any financial challenges you might be facing today, for a brighter tomorrow.