Today’s post is a bit of a long one, but it’s very important. As the title suggests, I’m going to discuss three steps that will help you achieve financial stability. I won’t bore you with a long intro, let’s just get stuck into the steps so you can learn how to stabilize your finances!
Make more money. Credit
Increase Your Income
The first step is to take a look at your personal income and figure out how you can improve it. Some people think this is a very materialistic thing to say. But, I think this is because we’re all just a little bit afraid of admitting the one truth about life; money matters, a lot. We like to say things like ‘money can’t buy happiness’, which is technically true – it can’t. However, money can buy an increased sense of financial security.
It’s not rocket science, someone with a high income will be far more financially stable than someone with a low income. The more money you have, the more money you’ve got to cover all the expenses life throws at you. All your bills can be paid, your mortgage can be paid off quickly, and you’ve got enough disposable income to pay for home comforts and worry less about going broke.
The question is, what can you do to increase your income? Here are some ideas you should try out:
Invest Your Money
The first idea is one of the most popular and effective ways of increasing your income. By investing your money, you can buy things that increase in value, then sell them for a profit. The stock market is a good place to do this if you want to make money quickly. Of course, you have to understand the nuances of this market to know how to find the best ‘quick’ investments. Investing in property and becoming a landlord is also another idea to increase your regular source of income.
Getting A Part-Time Job
First things first, you should have a full-time job if you want to be financially stable. This provides you with a regular and known source of income, every month. You don’t have to go through life wondering when your next paycheck will be – or how much you’ll get. Unfortunately, many people are in positions where their full-time job isn’t bringing in as much money as they’d like. They struggle to be financially stable, and can’t seem to get another job that pays more. In instances like this, the best tactic is to get a part-time job as well. This is something you can do on the side, in your spare time. You’ve got endless examples of things you can do, from traditional part-time jobs like bartending or retail to more modern ones like online freelancing. I won’t go into too much detail here as I wrote an article on secondary income sources not long ago. You can check it out if you want more in-depth information on this topic. Essentially, you need to pick something you’re comfortable doing, and you can boost your income quite considerably.
There’s a difference between having lots of money and having a comfortable amount of money. In essence, I’m not saying you all need to be super rich to have financial stability. You just need to have enough money to the point where you no longer worry about every little thing. You feel comfortable knowing you’ve got money as a safety net in case any financial problems occur. If you don’t earn a lot of money and do nothing about it, then there’s no denying your life will be filled with more financial complications. Especially in this day and age where the cost of living continues to rise.
Take your credit score from red to green. Source
Improve Your Credit Score
While writing this, I realized I could group a lot of things under one heading dedicated to improving your credit score. What is your credit score? It’s a number that determines how creditworthy you are. Banks and other financial institutions use this to decide whether or not they should let you apply for loans or other forms of credit. The better your number is, the more creditworthy you are. In essence, it proves you’re a reliable borrower and take good care of your finances.
The importance of a positive credit score is that it can help unlock different financial doors for you. If you have dreams of starting a business, you may need to apply for a business loan, which requires a credit check. The same goes for mortgage applications to buy a house or even something simple like getting your first credit card. A lot of things in the financial world are blocked by credit checks, meaning your score has to be top notch.
Furthermore, improving your credit score forces you to do certain things that bring financial stability as well. Just look at a few of the things you have to do:
Pay Off Any Debt
Debt is a huge factor when producing someone’s credit score. The more you have, the lower your score will be. So, getting rid of debt becomes a top priority for anyone looking to improve their score. This has the additional benefit of just making you more financially stable and secure. With less debt, you owe less money and gain back control of your finances.
Pay Bills On Time
When a lender checks your credit report, they’re keen to know how trustworthy you are as a borrower. They want to give credit to people they believe will pay everything back on time and leave no complications. As such, if your bills are always paid late, it leads to a low score as you’re a risky individual. Therefore, you need to focus on keeping up with bill payments, which also brings more stability to the table.
Avoid Applying For Too Much Credit
Applying for credit is one of those financial things that blur the lines between good and bad. Too much of it is definitely a bad thing as it means you’re borrowing money from so many different places. The more you borrow, the more your score will drop too. As a result, you need to make an effort to avoid applying for too much credit. It can be good in some regards; a credit card is a handy tool for example. However, don’t apply for loans every month or constantly look to borrow money.
As you can see, if you work to improve your credit score, you will do things that stabilize your financial position. So, work on this if you want true financial stability.
Spend less, save more. Link
Reduce Your Monthly Expenditure
It’s funny how similar your own financial life is to that of a business. Anyone that owns a business will tell you there’s a concept called cash flow. It basically refers to the money coming in and out of your company. Ideally, you want a positive cash flow, which means all the money coming in covers the money going out and leaves some behind. As an individual, you should be thinking about your own personal cash flow.
Now, you’ve already covered one thing in the first step; increasing your income. This brings more money into your personal bank account, and now you have to worry about the money leaving you. In short; you have to reduce your monthly expenses. Spending money is never a good thing for your finances unless that money is invested in something worthwhile. Otherwise, you’re literally just throwing money away. The problem is, so many of us do this without a second thought. We spend cash on things that aren’t essential to our life, simply because we can. But, the more money we spend, the less stable our finances become. It could come to the point where we’re spending more than we’re making, giving us a negative cash flow.
So, how can you reduce your monthly expenses? Take a look at the ideas below:
Create A Budget
Again, there are parallels between business life and personal life with this idea. Companies need to create budgets to help manage their money and ensure they’re not spending more than they have to. You should apply this to your personal life if you want to lower your monthly spending rates. Create a simple budget that takes into account all of your essential expenses like your bills, rent, etc.
Review Your Bills
Another way to reduce your expenses is to review all your monthly bills. Look at what you’re paying, and compare other companies to see if you can find a better deal. Loads of us stay with the same company for decades and don’t think twice about it. Little do we know there are cheaper bills out there just waiting to be had.
I want to round this piece off by saying a few words on the importance of financial stability. Having stable finances means you’ve got less to worry about in life. Your money is well-managed, and there’s never the fear of going broke or ending up in debt. It’s a simple process; earn more money, improve your credit score, and spend less – that’s all you need to do.