Financial stability is a dream goal for many. While it may not necessarily translate to being rich, it means you can comfortably handle your bills, pay your debts and have savings for emergencies and future endeavors.
To achieve financial stability and live the lifestyle you desire, you have to cultivate healthy financial habits and put in intentional efforts towards your financial goals. Whether you are employed or run a business, below are six steps to becoming more confident in your financial situation.
1. Set Financial Goals
The first step when starting your financial stability journey is to have a plan. Be honest about your current financial situation, and decide what you want to achieve in a few weeks, months, or years. Once you set clear financial goals, create a system for spending, saving, and investing your money. For example, if you want to buy a house in five years, you can create a plan to save a specific amount for your home’s down payment.
2. Find an Income in What You Enjoy
Whatever your financial goals are, you require money to make them happen. Your current income may not sufficiently cover your goals, and you can only cut back on so much. Consider finding a way to earn more money, preferably by doing something you love. This way, you can lessen your financial struggle and be more at peace.
Ways to increase your income include, starting a side hustle, trading your knowledge or skills as a freelancer or consultant, and improving your career worth by growing your skills to earn more. You can also ask for a salary raise if you feel it is overdue. As you make more money, be careful not to fall into the trap of upgrading your spending habits, as it defeats the purpose.
3. Create and Stick to a Budget
Create a budget by developing a spending plan based on your income, and stick to it. Write down all your monthly expenses and income, and allocate your money accordingly. Know which amount goes to basic bills, paying off debt if you have any, savings, and even miscellaneous expenses. Doing so helps you live below or within your means and avoid overspending.
You can utilize a 50/30/20 plan where half of your income goes to your primary expenses, 30% to expenses you can do without, and 20% for savings and other financial goals.
4. Grow Your Savings
Savings come in handy during emergencies. You can also use it to invest and accomplish other financial goals. To do this, practice paying yourself first whenever you earn money. If you wait to save after you have paid your bills, you may have nothing left. Start by opening a savings account and have a savings goal, such as 20% of your income.
Better yet, ask your employer to automatically transfer a specific amount to your savings account and send you the rest of the money. This is especially useful once you know how much you can comfortably save.
5. Invest Early
While saving is important, you need to invest in order to live comfortably when you retire. It doesn’t matter how much you currently earn or whether you are working part-time. Invest early and regularly by putting money into your retirement account to earn compound interest and cater to the future when you may not have an income.
Other investment options include Roth IRA and traditional IRA to help you grow your investment as they offer tax benefits. Even if you can spare little, starting early will give you a head start and allow you to enjoy more benefits.
6. Pay Off Debt
The most common obstacle to financial stability is debt. After setting up a budget and knowing how much you can spend, devise a debt payment plan to eliminate existing debt, including student and credit card loans. Even if you have a 20-year payment plan, it doesn’t mean you can’t pay it off more quickly. The faster you pay off your debts, the less interest you accumulate, resulting in savings in the long term.
When creating a debt repayment plan, prioritize them starting from the most urgent or expensive, and allocate more money towards clearing them. Debts like a mortgage can wait as you have more time. You can still make your mortgage payments without necessarily putting more money into it.
BONUS: Contact a Knowledgeable CPA for Help with Financial Stability
You don’t have to live paycheck to paycheck or work only towards paying bills. If you need professional help to steer you towards financial stability, Gurian CPA can help. Contact us today for sound financial management advice and accounting services to help you achieve your dreams.
