12 Easy Tips to Maintain Financial Stability and Security
Financial stability can help you become more successful with time as you can focus more on your work and less time worrying about your finances. In these difficult economic times, more of us are sharing that concern. And while we may not have control over the global economy, we can take steps to take control of our personal finances. Here are 12 common sense tips to financial stability.
1. Set Attainable Goals. The first step toward financial independence is knowing where you want to be. Once you’ve identified your goals, you must ask yourself a few questions: What’s important to me? What do I need? What do I want? Your answers to these questions will help define your goals. Next, put your goals in writing and get on the road to financial independence.
2. Budget Your Spending. You can organize your finances by keeping a budget. You need not be a financial expert to do budgeting nor do you need any special tools. A simple diary or an excel sheet should do. If you are not sure of using excel sheets there are many tutorials online that will help you understand the basics quickly. Once you are through, open a single sheet and start typing down all your spending for the first couple of months. Once done, take this data and use it for budgeting for the forthcoming months onwards. Find out details about wasteful spending and try to cut them down. Do a daily and a monthly budget to ensure you keep on track.
Even if you are facing severe financial problems, a budget can still help you get out of debt. A budget essentially organizes your spending. Sticking to a budget may be easier than creating a workable one. So if you find yourself budget-challenged, there are a lot of websites that help you create a budget to suit your specific needs.
3. Track Spending. One trait that is common to most people with financial problems is their inability to track their spending. Dig out your paycheck stubs, income tax return, credit card statements and year-end summaries, details of home, car and any other loans, and financial statements from your banks and investment firms and keep detailed records.
Then evaluate how you’re spending your money, and see what you can cut out or reduce. Decide if each expense is absolutely necessary, then eliminate the unnecessary.
4. Control Impulse Spending. The biggest problem for many of us. Impulse spending, on eating out and shopping and online purchases, is a big drain on our finances, the biggest budget breaker for many, and a sure way to be in dire financial straits.
Impulse spending can eat into your savings like none other. Remember the party you gave your friends last night? Remember you went shopping yesterday and brought home things that you really don't need? This is what impulse spending is all about. The only way to stop this is to start spending consciously. When-ever you get out to shop write down what exactly you want to buy and stick to it. Similarly cut down on parties or look for cheaper ways of entertainment.
5. Invest in the Future. If you’re young, you probably don’t think about retirement much. But it’s important. Even if you think you can always plan for retirement later, do it now. The growth of your investments over time will be amazing if you start in your 20s.
Many of us are afraid of investments. But believe it or not, investing some money now can do a lot of good later down the line. They say work for money and make money work for you and this is very much true
6. Make Savings Automatic. The new rule in saving money is: SAVINGS – MONTHLY INCOME= MONTHLY EXPENDITURES. This should be your top priority, especially if you don’t have a solid emergency fund yet. Make it the first bill you pay each payday, by having a set amount automatically transferred from your checking account to your savings. Don’t even think about this transaction — just make sure it happens, each and every payday.
7. Eliminate and Avoid Debt. This is the simplest, but perhaps the most difficult tip. The first critical step towards eliminating credit card debt is to stop using the cards. Next, identify your highest interest cards and pay them down first. Call your credit card companies and request lower interest rates.
If you’ve got credit cards, personal loans, or other such debt, you need to start a debt elimination plan. List out your debts and arrange them in order from smallest balance at the top to the largest at the bottom. Then focus on the debt at the top, putting as much as you can into it.
8. Put your Monthly Expenses into Separate Envelope. This is a simple system to keep track of how much money you have for spending. Let’s say you set aside three amounts in your budget each payday — one for gas, one for groceries, one for eating out. Withdraw those amounts on payday, and put them in three separate envelopes. That way, you can easily track how much you have left for each of these expenses, and when you run out of money, you know it immediately. You don’t overspend in these categories. If you regularly run out too fast, you may need to rethink your budget.
9. Pay Bills Immediately. One good habit is to pay bills as soon as they come in. Also, as much as possible, try to get your bills to be paid through automatic deduction. Use your bank’s online check system to make regular automatic payments. This way, all of your regular expenses in your budget are taken care of.
10. Read about Money Management. The more you educate yourself, the better your finances will be.
11. Look to Grow your Net Worth. Do whatever you can to improve your net worth, either by reducing your debt, increasing your savings, or increasing your income, or all of the above. Look for new ways to make money, or to get paid more for what you do. Over the course of months, if you calculate your net worth each month, you’ll see it grow. And that feels great.
12. Keep your Family Secure by Having an Emergency Fund.
As the name suggests, this fund helps you in times of emergency. For instance, if you suddenly lose your job, or are involved in an accident and are unable to work, you can turn to your emergency fund for help. No matter what your income, you must have a minimum of three to six months’ worth of savings for living expenses.
Once you have a household budget, start cutting costs wherever you can, and use any savings to build an emergency fund to pay for unexpected expenses. A financial cushion of at least 6 months of living expenses will give you some peace of mind in the event of a job loss or a medical emergency. Avoid the temptation to tap into your fund except in emergencies, and revisit it each year to make sure it still is enough to cover your costs if necessary.
If you have a spouse and/or dependents, you should definitely get life insurance and make a will — as soon as possible! Also research other insurance, such as health insurance.