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America is experiencing a huge period of turbulence as interest rates rise and ordinary people struggle to keep up. One survey revealed that 77% of Americans were anxious about their financial situation.

Worrying about your financial situation isn’t going to get you to where you need to be, though. Instead, taking targeted action is crucial to progression, but you cannot rely on platitudes like “ask for a raise” or “get a better job” because those things aren’t practical or guaranteed for most people. 

Let’s discuss some steps you can take to help you reach financial stability.

What Does Financial Stability Actually Mean?

Financial stability doesn’t mean you’re rich or wealthy. It’s a phrase used to describe someone confident about their financial situation. They may not be able to slam down cash for a Tesla fresh off the production line, but they’re never worried about being able to pay their bills.

Someone who is financially stable is largely debt-free, with no debts other than mortgages or student loans. But making their repayments is no trouble, and they’ve also got enough money to cover practically any emergency. 

The concept cannot be defined by a dollar number. Instead, it just means that you’re not stressed about money. Sound like a dream? Financial stability is more achievable than you might think.

 1.   Set Clear Financial Goals

Financial stability means different things to different people. Some people are looking to become multi-millionaires. Others just want to stop being part of the half of Americans living paycheck to paycheck.

Writing down your financial goals is the first step to taking meaningful action. They provide direction and give you something to aim for. Plus, it’s a great way to begin planning your roadmap.

Begin with modest goals, such as:

• Cutting down on unnecessary spending.
• Eliminating your debts.
• Getting a handle on your mortgage.
• Adding X amount to your investment account every year.

Whether it’s modest or ambitious, it doesn’t matter. Outline some short and long-term financial goals.

2.   Formulate a Budget

Controlling your cash is the foundation of building financial stability. But you cannot expect to achieve stability if you don’t know where your money is going.

Budgets are plans that outline everything from necessary expenses like bills and food to luxury purchases and retirement savings.

You can follow plenty of budgeting models, such as the zero-based budgeting system and the 50/30/20 budget. Check out some models and see what works for you.

The secret to any successful budget is to create one you can stick to.

3.   Always Pay Yourself First

Pay yourself before anybody else. It becomes difficult to save when you’re paying bills and shopping first. Instead, automatically transfer funds to a locked savings account when you are usually paid.

How much should you transfer? It all goes back to your budget. Some people can allocate a little, and others a lot. However much you can save, put it on autopilot and watch your nest egg grow.

4.   Eliminate Your Debt 

Debt is like a boulder dragging you down while trying to climb the mountain. If you’re dealing with high-interest debt, like credit card debt, ensure you pay it down aggressively to avoid getting stung by those sky-high rates.

If you’re struggling, help is available. Check out what support options are available in your state. For example, you could consult organizations offering debt relief in Florida or independent financial advisors in California. Even if you consult professional financial advisors, it’s still a good idea to have a good personal grasp of where your financial situation is.   

Here are some tactics that could help you when addressing your debt:

• Pay off your debts with the highest interest rate first.
• Alternatively, use the snowball method to pay off the debt with the smallest balance first.
• Always make the minimum monthly repayment to protect your credit score.
• Balance transfer cards and debt consolidation loans may enable you to pay less interest.
• Seek professional help if you’re struggling to cope.

5.   Invest Your Money

Preparing for the future is vital, whether building a nest egg to buy a house or working on your retirement funds.Your workplace may already have a retirement program available. Enroll in your 401(k) and sock away the maximum amount to take advantage of any employer matching. Alternatively, you can use tax-advantaged accounts, like the traditional IRA. 

Due to the power of compounding, the earlier you start, the less work you’ll have to put in to catch up later in life.

6.   Fill Your Emergency Fund

Emergency savings enable you to weather a crisis, such as your car breaking down or an unexpected job loss. With a well-stocked emergency fund, you can avoid taking on debt if your life takes a turn for the worst.

Most experts recommend that an emergency fund consist of three to six months of living expenses, but the choice is yours. It’s not uncommon for more conservative savers to have 12 months of living expenses in their emergency funds.

Ideally, you should prioritize your emergency fund before you turn to things like retirement savings. 

7.   Reward Yourself

It may seem counterintuitive to throw money at a vacation or a restaurant trip, but it’s essential. The fact is that paying down debts and living frugally can weigh on you. Just because you can trim your budget to the barebones doesn’t mean you should.

Setting yourself targets and rewarding yourself (within reason) for your efforts is essential for maintaining morale.

So, don’t be afraid to set aside some money for discretionary spending as a reward.

Financial Stability is Within Reach

The doom-and-gloom headlines are coming thick and fast. Most recently, credit card balances spiked $154 billion year-on-year, indicating that Americans are taking on more debt than ever.

But with careful planning and dedication, financial stability is within your grasp. It all starts by making a plan and practicing what you preach. Although the journey may be longer for you than for your neighbor, practicing good financial habits will ultimately be rewarded later.

What are you doing in your pursuit of financial stability?

Published by: Martin De Juan