If you are able to completely support yourself financially without the help of family, friends, and the government, that generally means you’re financially independent. Financial independence, however, is different from being stable.
Being financially stable means you have the resources whatever direction life takes you. You’ll be able to weather the storm because you make money work for you instead of you working for money. If you want to become financially stable slowly, but surely, here are some things that you must take into consideration moving forward.
1. Where does your cash come from?
To become financially stable, you must know where your monetary assets are coming from and where they go each month. When we receive our salary, the majority will go straight out of our account for bills such as rent, groceries and student loans.
For an efficient process you can use Mint, which is a software that allows people to input all of their financial accounts. With it, you can track your assets and liabilities over the long term. You can set budgets and see where you need to improve. The tool gives updates on your regular spending habits and notifies you if you’re spending too much on things such as fancy restaurants or shopping sprees. If Mint is too complicated for you, maybe try Money Dashboard, as this platform has a very easy to navigate interface for first time users.
Apart from receiving a monthly salary, you can make your money work for you by investing in stocks, commodities, or indices, which present investors with the opportunity to trade and profit on macro financial developments. According to multi asset investment solutions provider Teramusu, indices aggregate conflicting and complementary market trends in the form the FTSE, S&P 500, Dow Jones and many more. Try different investment methods and see what you’re most comfortable with. Don’t be afraid to make a mistake because lessons are invaluable to long-term improvement.
2. Know your goals and budget
It’s cliché, but to be able to set a budget to attain your goals, you must first, “know thyself”. Knowing thyself makes investors and traders excellent in their respective fields, as it helps them understand their own personality, and aids them in planning ahead and making important decisions.
Is one of your goals to buy a house? If so, you may want to start paying off the debt from your credit card or any loans that you may have first before committing to such a big financial demand. It all depends on where you’re currently at with your finances.
As a rule of thumb, you will never be able to save if you keep on paying for huge credit card bills every month. So before you can start saving, it’s important to pay monthly credit card bills at a minimum. How to eradicate this type of debt will be discussed in detail in Step 3.
You also need to know how much you need to save before you can achieve your goals. If it’s for a house, calculate the total costs. The usual down payment is about 20% of the total house price. You will be able to reach your goals in time if you set a budget and work to it slowly.
3. Remove Debt Completely
If you already have a significant amount of debt, eliminating it should be your top priority. It can be a long and tedious process but it’s important you’re dedicated to the long-term goal of becoming debt-free.
Here’s a list that you should prioritize to keep debt to a minimum:
– Pay the highest-interest debt first. This is usually your credit card. If you can, don’t just pay the minimum because the “adjustment rate” will keep your finances pinned.
– If you have savings, use it to pay for your high-interest debt so you won’t incur extra costs from interest rates.
– Transfer your high-interest debt to a bank with lower interest rates.
– Call your bank and ask if they can reconsider giving you lower interest rates. Say that you’re willing to pay them all off slowly but surely. A polite phone call can make a huge difference in paying off your debt.
– Never use a credit card cash advance as the rate can go as high as 30%.
It’s important to get to grips with your cash flow, determine your goals, and eradicate your debt to have financial stability. Becoming financially stable shouldn’t be hard if you’re determined to work your way out of debt.