Money is a fungible asset that seems to disappear quickly when you least expect it. It’s also something that there never seems to be enough of when you need it, creating a feeling of financial insecurity. Fortunately, you don’t have to live with this feeling if you’re willing to engage in essential steps to help you attain financial security in the long term.
Building financial stability is a strategy that involves different steps to help you attain your goals. It’s a blend of putting your money to work, figuring out plans for your life’s goals, and engaging in discipline to put money aside to fund each part of your strategy.
Engaging in the following steps helps you build a financial foundation that supports you and yours for the long term. The knowledge that you have the money you need to cover almost any contingency or emergency is invaluable. The result is one of you gaining peace of mind and confidence in your ability to weather financial storms.
Investing money
You don’t need to be a millionaire to invest money, and you don’t need a lot to get started. Investing is a proven strategy that builds a financial cushion and replenishes itself when drawn down. It’s something you can do on your own with research, or you can put your money with an investment advisor.
Before you invest, make sure you understand the basics of putting your money to work. You want to look for investment vehicles with steady and reliable growth over a long period. Putting your money into these types of investments has a high probability of delivering reasonable returns, tracking inflation so your money doesn’t lose its value, and they don’t lock your money away in the event you require cash.
It’s advisable to start investing as soon as you start your career. Returns accrue over time, which means you’ll have more money growth if you start early. Someone who starts investing at 25 will have a lot more value in their investments as opposed to someone who starts at 30.
Build your savings
Saving money is another way to build a financial cushion to help you get through a tough time, make a major purchase, or fund a dream. To save, dedicating a portion of each paycheck to a savings account is something that needs to be a priority. You may not be as motivated to work on your savings because it doesn’t grow as fast as investing, but it’s worth the effort because it’s liquid cash that you can use at a moment’s notice.
Most financial experts recommend that you take 10% out of each paycheck to fund your investments and savings. It’s a good metric, but if you can’t afford to set aside 10%, you can take out less and still be successful in building up your savings. The key is to stay regular with putting money into the savings, even if it’s only $20. An interest-bearing savings or money market account means that you’ll earn a little extra regardless of how much you deposit.
Create a financial plan
A financial plan is both a guide and a tracker that helps you reach a financial goal, no matter what it may be. For example, you want to put together a down payment for a home, and you want to have a sufficient amount on hand to reach the ideal payment amount on the mortgage. One method is to keep setting money aside as you’re able to, then hope you can reach your goal by a certain point in time. However, this doesn’t provide you with stability, much less a time frame and plan for how you’re going to get the money together.
Creating a financial plan removes most of the uncertainties that come with trying to put together money for a specific goal. You look at your income sources and the rate at which you can save, including financial gifts that are being offered, and any other money that may be available for your goal. Take the weekly amount you can set aside, and multiply it until you reach your goal number. Combine that number with the money you currently have on hand, and you can see how long it will take to complete your plan.
Remember that a financial plan is only as good as you are. That is, you need to start your plan, and then stick to it to reach your goal date for full funding. There’s no time like the present to get started and get used to setting money aside, and then forgetting about it until the next deposit is due.
Reduce your debt load
Debt is something that makes it easier to finance a purchase, but it also eats away at your budget and spare cash. Add into that the fact that interest on the debt can cause it to balloon, something that keeps you indebted for longer. This is especially true of credit cards and other revolving lines of credit.
It may not be possible to be entirely debt-free due to things like mortgages and automobile loans. However, you can keep your debts to a minimum by reducing unnecessary spending on your credit cards and working on paying down your existing debts. Engaging in various debt reduction strategies, such as obtaining a personal or installment loan, serves to reduce the amount of interest you pay over time and helps you get out of debt faster.
The peace of mind that comes with achieving financial stability
Creating financial stability is work, and it can be stressful as you try to figure out where the money will come from. The fact is, building your money cushion is a matter of time, patience, and dedication. Money accrues over time, and you can speed up its growth by putting it into stable investment vehicles. However, you may feel like you’re broke because you’re dedicating your spare cash to building your reserves.
Remind yourself that you’re working on your ability to live a life that’s mostly free from money stress and that it’s worth making the effort in the long run. There will come a point where you can easily handle any financial contingency without wondering where the money’s coming from, and that’s an invaluable feeling.
Ashley Nielsen
Ashley Nielsen earned a B.S. degree in Business Administration Marketing at Point Loma Nazarene University. She is a freelance writer who loves to share knowledge about general business, marketing, lifestyle, wellness, and financial tips. During her free time, she enjoys being outside, staying active, reading a book, or diving deep into her favorite music.
