The U.S. economy has experienced several setbacks, such as the financial crisis of 2007-08 and the outbreak of the COVID-19 pandemic, in the last two decades. Bankruptcy filings reached almost 5% (per 1000 individuals) in certain states as of 2019. It made people realize the importance of financial stability.
Financial stability is when you are not worried about paying your bills and meeting your daily expenses. It is a relaxed state of financial affairs where you want more, but are getting by with ease. These minor changes in your lifestyle can develop into habits that lead to financial stability.
Start Saving
No matter what you hear about why you should not save, it’s all misinformation. If you don’t save, you cannot expect to be financially stable. Even billionaires started by saving a little to build their empire.
Start saving by living below your means. Your expenses should be lesser than what you make. Small savings add up over time.
Invest Smartly
Now that you have started saving don’t just put them in a piggy bank. Invest it. There are so many investment avenues that you are spoilt for choice. Depending on your risk appetite, age, and goals, you can invest stocks, debt, gold, mutual funds, real estate, and insurance.
Usually, those with a high-risk appetite can invest in stocks. It requires timing the market. If you are risk-averse, then invest in bonds, deposits, and gold. If you have enough savings, you can also invest in real estate that generates rental income. Investing in insurance will help you cover medical expenses. This means you will not have to dip into your savings during medical emergencies.
Invest In Yourself
Forbes magazine reported that employers are looking at people who are willing to upskill. So, invest in yourself before you become obsolete. Learn new skills and hone your present ones.
The skills that employers value most and will be relevant in the future are critical thinking, problem-solving, technological capabilities, creativity, adaptability, cultural intelligence, emotional intelligence, decision-making, and leadership.
Know That Debt Is Your Enemy
No matter how amazing the deal is, never fall for the debt trap. Make sure that you spend nothing more that you earn. Pay off all your existing debt as fast as possible. Once you owe nothing, you can achieve real financial stability.
The only exception to this is a mortgage. You can continue with the actual payments on that, but all other debt has to go. A mortgage will at least result in you owning a home at the end.
Have a Contingency Fund
Life does not always go as you plan. You may have a stable job and a comfortable lifestyle, but you never know what event will come and rock your boat. Therefore, it prudent to start a contingency fund. Make sure that you put away a little every month for emergencies.
Just because it is mentioned last, does not mean it is not essential. It is equally important to have an emergency fund.
Once you understand what financial stability is, and know what habits can help you achieve it. Just make sure that you stick to it.
