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Financial stability ensures you have enough money to cover your bills, expenses, hobbies and other things without running out. It also means you can live the lifestyle that you truly want. Let’s explore how you can achieve financial stability while saving for your future.
What Does Financial Stability Mean?
Financial stability is a mindset rather than a number. When you have financial stability, you feel confident about your financial situation and have the funds to pay your bills without worrying about it.
Being financially stable also means being debt-free and having an emergency fund as well as enough savings for your future goals. Financial stability takes time and work, but it’s something that you can achieve.
Living Within Your Means
This is advice that many have heard, but how do you actually do it, especially in times of high inflation? Living within your means works in tandem with budgeting (more on that later) and using a money management app or your mobile banking app. Your budget will tell you how much you can spend each month, and you’ll use that number to make sure you’re not overspending.
Creating an Emergency Fund
The purpose of an emergency fund is to have money saved in case of an emergency such as a job loss, unexpected medical bills or other urgent situations where you need cash quickly. An emergency fund also helps you avoid using credit cards and racking up debt to help you stay afloat. You should aim to have at least 3-6 months’ worth of expenses in your emergency fund.
Starting as small as putting $25 a month into your emergency fund can add up to real savings in no time. If you find it hard to remember to contribute to the fund, try making it automatic by having a certain amount deducted from your paycheck and put directly into your savings account.
Paying Off Debts
Having a lot of debt can make it difficult to stay afloat during hard times by directing your free money toward just paying down interest. There are a few ways you can work toward paying off your debts, from debt consolidation to choosing one debt to devote extra funds toward paying off in full and then proceeding down the list until you’ve knocked them all out. Eliminating as much debt as possible will help you feel like you have more financial stability and keep more of your money in your pocket.
Setting and Achieving Goals for Your Future
Right now your goal may just involve being financially stable. But including other goals will give you things to strive toward and save for. It could be retirement, purchasing a house, a large vacation — whatever holds meaning for you.
Remember your goals don’t have to be set in stone. But they do have to be achievable. Here’s how you can do that with SMART goals:
- Specific: Be as specific as possible with what you want to achieve, when you want to achieve it by and how much you need to save for it.
- Measurable: How will you know you’ve met your goal?
- Achievable: Do you have the resources necessary to achieve this goal?
- Relevant/Realistic: Is the goal meaningful to you? Is it possible to achieve? For example, building a house is possible, but doing it in a month is not.
- Time-bound: Every goal needs a timeline with any necessary benchmarks you need to meet included.
How to Create and Adjust Your Budget Over Time
This can seem daunting at first, but it gets easier with practice. A realistic budget is an essential component of living within your means and achieving financial stability. Every time your finances change in some way, your budget will need reworking.
Even if there aren’t changes in your finances, you should still rework your budget a few times a year to make sure it still works for you and see if there are any expenses you can cut back on.
The best way to start budgeting is to write down all of your income after taxes, then list out all of your expenses, including fixed expenses that don’t change, flexible expenses that are variable (for example, gas and groceries) and discretionary expenses (for example, dining out). Next, add up all your expenses and subtract them from your income.
Once you’ve finished creating your budget, optimize your expenses by getting a money management app or using your mobile banking app to track your spending.
Saving and Investing Tips
Saving and investing are strategic ways to prepare for your future. And with the right savings account, you can even earn interest, which helps you put more money away.
It’s never too late to start a savings account, and one that earns interest will do even more for you. Your interest earnings may be small, but they’ll add up as you continue saving. However, not all savings accounts offer interest earnings, so it’s important to do your research when looking for an account.
Certificates are a special savings product that come with a fixed interest rate (often higher than normal savings accounts) and maturity date. When you open a Certificate, you agree to not take the money out for the specified amount of time; in return, you get extra money from interest. However, Certificates do have minimum deposit requirements, so make sure you’re committed to locking up your funds for a while.
Eager to Make Some Financial Changes to Your Life?
Change your short-term financial outlook while supporting your long-term vision and planning with our guide to setting financial goals and resolutions.
