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!
A Financially Stable Family
Table of Contents
- 1 A Financially Stable Family
- 2 Being Financially Stable
- 2.1 Budgets are the Anchor for a Financially Stable Life
- 2.2 Addressing Financial Responsibilities and Obligations
- 3 Not Financially Stable?
- 4 Ways to Become Financially Stable
- 4.1 Accelerating Debt Repayment
- 4.2 Balanced LifeStyle
- 4.3 Share this:
- 4.4 More related content, please!
My friend, let me start by encouraging you – living a financially stable life is within 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. The benefits are there for us, and for our children to enjoy. Change starts… NOW!
Financially Stable Meaning?
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.)
Being Financially Stable
Another point I’d like to make: please consider these suggestions as 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! Also, remember to push yourself. There is always someplace to improve or polish.
Budgets are the Anchor for a Financially Stable Life
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.
Addressing 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 of 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!
Emergency Funds are Essential
Getting a proper emergency fund is very important and should be a high-priority target right after you set up your budget and life insurance.
Paying Regular Bills
Next up, you need 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
Within the same thought, 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 helping you achieve and supporting your Financially Stable Life.
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!
Meaning of Financially Stable in Retirement?
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 is 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.
Not Financially Stable?
Are you still far away from where you’d like to be financially? Do. not. worry. Let’s get some of the grit washed off and re-kindle some hope! You’ve got this. This is exactly where cultivating Mêtis in your Money Matters comes into play.
Becoming Financially Stable: 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 mistakes, pause, reflect and fix the issues. My friend, we have all been here. When (not if) mistakes happen remember to address them and then move on. I’m sure you’ll nail it next time!
Financially Stable Family? Motivation and Discipline Required!
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.
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.
Ways to Become Financially Stable
Here are some action items to think about. Also, I think it is important for a financially stable family to teach and promote these values to the next generation as well. Remember, any challenges we face can be turned around into learning experiences for our children. Why not take advantage of a difficult financial situation to equip the next generation?
Accelerating Debt Repayment
To clarify, 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! Getting rid of extra, non-mortgage debt is one of the most efficient ways to become financially stable.
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 want to 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.
Increase your Income
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!
Help those who are financially not Stable (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.
Teach your Kids the Meaning of Financially Stable Living (College, Vocational training, and Weddings)
Last, but certainly not least, let’s talk about one of the best parts of the family. One amazing and beautiful part of life is to watch your children grow. In addition to preparing for your own retirement, and doing everything else we talked about, I think it makes sense to consider how you can help prepare and equip them. For example, this could include a 529 plan.
Additionally, beyond the scope of vocation, 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.
No matter your financial path and that of your child, along the way, remember to teach them the meaning of financially stable living. They are always watching and learning! Beyond saving for weddings, helping pay for college, trade school, or otherwise, why not teach them this essential quality as well?