How does one achieve and maintain a financially stable life? How do you get organized, and what should you do first? Here are some practical, realistic suggestions on how to be financially stable.
In this post, we’ll start by learning how to become financially stable, and then we’ll cover how to be financially stable going forward. Never look back!
Implementing and Achieving a Financially Stable Life
My friend, let me start by encouraging you – living a financially stable life is within our grasp. One of the reasons I picked this topic is because of the immediate action we can take to strike a balance and improve our financial quality of life.
What does Financially Stable mean? How to become Financially Stable
While there are general standards, we think the definition of a financially stable life includes these facets:
- Implementing and regularly practicing a Budget.
- Having enough income to cover current Financial Responsibilities and Obligations.
- Enough income left over for the future.
- Accelerating your Debt Repayment.
- Enjoying a Balanced Lifestyle.
- Being able to Give to those in need.
Note, I did not immediately list being debt-free! I believe a healthy, financially vibrant life can be one that includes an accelerated debt plan. Debt should be a priority, and it can be a heavy burden. We’ll cover more on this particular point, below.
Another point I’d like to make, this list is intended to be a starting place. We are all at different places in our financial journey; see what works for you and your family and make sure to consult with a trusted financial advisor!
Budgets are an anchor for Financially Stable Living
My friend, I encourage you to spend a little extra time on this first step and make sure you have a good framework in place. It doesn’t need to be perfect! Getting started is the most important piece, and maintaining a budget takes practice. Like any good habit, keep chipping away and you’ll quickly notice positive changes.
Financial Responsibilities and Obligations
With a good budget, you’ll be able to move through these next steps with greater efficiency. You’ll have a good grasp on net income and your expenses. Now, let’s get to work with an intelligent allocation of those dollars.
Chief of one’s financial responsibilities is to have a good life insurance policy in place. If you are the primary source of income, then this is especially true! The unexpected passing of a loved one is never easy – why leave an even heavier burden in the form of debt and insufficient finances?
My friend, this is not the most comfortable topic, but it is essential. If you do not currently have this in place, then move it to the very top of your list of things to do!
Paying Regular Bills
Beyond that, this point is meant to include income sufficient to pay the monthly bills and save for the more infrequent ones. For a standard bi-weekly paycheck, I find the monthly bills are easier to “keep an eye on” when they are logged and tracked in a budget. Not sure what those are? Not to worry – take a look at your transactions and start there. By keeping an eye on your finances you’ll be able to get better control of where your dollars are going and be able to make any necessary edits to reduce spending.
Anticipating Irregular Bills and Expenses
For the infrequent bills, I highly recommend using sinking funds to cover those by saving a little each month until they are due. Sinking funds are also easily tracked with a good budget, and they help take the guesswork out! One of my favorite uses is preparing for Christmas shopping!
Sinking funds are highly effective in achieving and supporting your Financially Stable Life.
Emergency Funds are Essential
Getting a proper emergency fund is also important and should be a high-priority target right after you set up your budget and life insurance.
Preparing for Medical Expenses
One of my favorite financial tools is the HSA. If you are part of a high-deductible plan, this could be a good fit! Your debt profile will drive how much you are able to contribute, and it is a good idea to do what you can in the meantime. Used properly, the HSA can provide a triple tax benefit!
Financial Stability in the Future
I notice extreme schools of thought for this point – some will essentially blow off retirement as tomorrow’s problem; others obsess with preparing for retirement at the expense of any enjoyment today. I believe the answer in the middle!
A Financially Stable life supports a fulfilling lifestyle today while also addressing retirement and the future.
Take advantage of any match your employer may offer on the 401(k). This is free money – don’t leave it on the table!
If you are under a heavy debt burden (one that will span more than a couple of years), I think it makes sense to hold fast at the contribution match. For example, if your employer matches 5%, then contribute that amount to collect the match but stop there until you are out from under the debt.
If you don’t have access to one, or if you are already maxing the annual contribution, see if a Roth IRA fits. Regardless, avoid solving today’s problems at the sacrifice of tomorrow.
Kiddos – Vocational training and Weddings
Another amazing and beautiful part of life is to watch your children grow. In addition to preparing for your own retirement, I think it makes sense to consider how you can help prepare and equip them. For example, this could include a 529 plan.
Additionally, consider setting up a long-term sinking fund for your child’s wedding. It will be here sooner than you think! While there can be any degree of cost, it never hurts to get a head start now.
Accelerating Debt Repayment
In our blueprint, I’m counting minimum debt payments in the Financial Responsibilities and Obligations section, above. However, in my opinion, being Financially Stable means you are accelerating those debt repayments. By paying down additional chunks of principal balance you will get out of debt quicker!
Need an idea on which debt you should address first? Take a moment and order them based on the interest rate, then start paying extra on the highest rate of interest while maintaining the minimum payments on the others. There are certainly other methods of ordering debt repayment, but this worked best for me.
Here, you’ll figure out what needs to “go” and what to “add” to your family’s financial profile. For example, during the summer we like to take advantage of a pool pass. On the other side, we trimmed out the vast majority of subscription-based services as we felt those weren’t in line with the lifestyle we are pursuing as a family. At the end of the day, the point is to free up money that is being spent frivolously and re-allocate into that which aligns with your values and goals.
It is also in this step that one should take a hard look at potential side-gigs, or perhaps brushing up on a skill set in order to move forward in their career. Yes, trimming out expenses frees up more money; perhaps an even stronger route is to increase your household income as well. Something to keep in mind!
Giving to those in Need
Is there a cause that you are passionate about? Apply your skills and interests in service toward others. While this is listed at the end of the list it is also an essential element to living a balanced life. Joy can be found in giving to those who are in need. However, just as these previous steps require research and dedication, make sure you are familiar with where your charitable donations are going. I believe this is part of being a good steward and demonstrates financial maturity.
Living a Financially Stable Life Going Forward
Great, we’ve covered all these hard topics and you’ve taken amazing strides forward. You’re well-equipped, have been cultivating Mêtis in your Money Matters, and are now faced with the challenge of keeping the momentum going.
Give yourself room to Make Mistakes
This is a difficult process, and you need room to make mistakes without beating yourself up! If you’ve made a mistake, pause, reflect and fix the issues. Move on, and do better next time.
Motivation and Discipline
My friend, this is not easy, but it is doable! Building on the previous steps, keep the ball rolling and keep focused on your goals. Keep reinforcing discipline, and adapt to the situations at hand. Get motivated, get disciplined, and stay flexible.
My friend, I am excited for you and for your future! Give yourself permission to grab the proverbial bull by the horns and change your financial lifestyle. Best of luck to you and your family as you navigate your financial journey.
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