Being financially stable helps families function better. You and your family have less stress when you don’t have to worry about financial issues. Having a plan that focuses on how to be financially stable is vital.
Like most things, financial stability takes planning. Sitting down and looking over your current financial situation can be painful. The long-term benefits will far outweigh the discomfort.
Look over Your Budget
Get in there and dig into your current financial situation. Review income versus expenses. If you are married, you need to do this together. Are there areas you need to cut back on spending? Be honest with yourself and your spouse.
Do you have seasonal income? Try to put money away during times you have steady work. To help offset expenses during times that income is not available.
Do you have seasonal expenses? Wintertime heating costs? Quarterly, semi-annual or annual bills can mess up a budget unless you plan for them. Take those into account for those months when they are due.
Use Cash to Control Your Spending
Paying with cash helps you control your spending. Using credit or debit cards can lead to interest or overcharging fees.
One cash payment method is called the envelope system. You put the amount of money you need to pay for gas, groceries, eating out, and other needs in separate envelopes. Write what it is for on the outside of the envelope. That is all you are allowed to spend each month on these items. You may need to adjust the amounts as you use this method.
Emergency Spending Accounts
Many find having a separate account for emergencies helps them. It also gives them peace of mind to know they have a backup if things go wrong.
Do you have an emergency spending account set aside? Have a set amount of money automatically transferred to this account every month. Then, you never see the money and don’t consider spending it.
Consider having a savings account to deposit seasonal income. If you have seasonal expenses, you might consider a savings account for those. These accounts would be separate from your emergency spending account.
Pay down your Debts
Are there ways you can focus on paying down debts faster? Putting a few extra dollars on your lowest credit card bill will help you pay it off sooner. Once that is paid off, roll the money over to the next highest account. Getting rid of credit card debt takes a lot of financial stress and pressure off.
Paying your credit cards off will save you money because you’ll pay less in interest.
Do you have other loans? Student loans, car loans? When your credit cards are paid off, start working on the lowest loan you have. Having these debts paid off will enhance your finances.
Focusing on paying off your debt teaches you a different mindset. You are more focused on how much money you can save by not using interest-based tools.
When you buy a new car, you will have a larger down payment. Thus, the loan will be less, and the amount you pay in interest will be less.
Does Your Insurance meet Your Current Needs?
Does your homeowner’s insurance meet your needs? Have you remodelled or made some significant improvements? Has the value of your home increased? Do you have enough insurance to cover the increase in value of your home? Sit down with your insurance company and do a review of your present coverage.
Look at your life insurance plans. Do they still meet your needs, or do they need to be adjusted? A brief conversation with your insurance agent will help you decide.
Saving for Retirement
Many employers offer retirement plans. Take advantage of those, especially if they provide employer matching. Some employers will match some contributions you make to their retirement plan.
You can open an individual retirement account (IRA) if your employer does not offer them. Put money away into this account every month. You and your spouse should each have one.
Have you addressed all your financial needs?
You have stabilized your finances and got your debts under control. Next, look at ways to invest your money. Review how your retirement programs work and what investments are making them money. Reviewing them is a way to start learning about investments and how they work.
Not worrying about how you will pay your bills is part of financial stability. Study as much financial information as you can. Read and understand how your savings accounts, debt elimination, and retirement accounts work. Learning about insurance and how it works will help as well. Doing this will put you in better control of your finances.
Understanding your finances will enable you to address your financial security. And find ways to increase it.