Financial stability is something that everyone aspires to achieve in their lives. A financially stable person is someone who has control over their finances and utilises good money management to gain independence in life. Someone who is not financially stable is frequently under a lot of stress and faces immense difficulty in making ends meet in terms of finances. As such, it is not uncommon for financial stability to be used as a measure of success in life. This article takes a closer look at the benefits of being financially stable in life and also provides tips on steps that can be taken in order to become a financially stable person.
Personal financial stability can mean different things to different people – as it depends on income level, age and spending habits. It is not necessarily defined by the amount of wealth one possesses but rather on your ability to achieve your financial goals.
What are the characteristics of a financially stable person?
- Having a steady source of income: Having a constant inflow of cash is a clear indicator of being financially stable as growing wealth is crucial.
- Ability to pay bills on time: A financially stable person will not get late to make due payments – be it utility bills, credit card bills, rent or other types of expenses.
- Ability to save a portion of income: Saving money is a very important aspect of being financially stable and financially stable people ensure that they allocate a monthly amount of their earnings as savings without fail.
- A debt-free life: Whether it is a personal loan, credit card debt, mortgages, car lease, a financially stable person is able to repay their debt without much difficulty or without it affecting other aspects of their life.
What are the benefits of being financially stable?
Needless to say, being financially stable adds value to life and offers a number of benefits. Some of them include:
- Complete control over your expenses
Being financially stable means that you are able to cover your expenditure without it being too much of a hassle. In order to do this, you need to properly budget your monthly spending and track expenses so that you are aware of how much you are spending, helping you plan ahead for the future. From regular payments to large expenses, once you are financially stable, you will have complete control over where your money is going.
- Ability to absorb an unexpected financial shock
Another great benefit of being financially stable is that it puts you in a position where you are able to cope with sudden and unexpected financial situations that life may throw at you. Whether it is a serious medical emergency or an urgent loan required by a loved one – you will be able to deal with these situations without having to face problems.
- On track to achieve financial & life goals
Being financially makes it much easier for you to achieve your goals. In order to reach most goals you have set for yourself in life, you need to have your finances in order. Whether you wish to pursue your higher education, buy a vehicle or even start a family – being financially stable is a definite prerequisite, which is why personal success is often defined by it.
- Financial freedom to make choices to enjoy life
When you aren’t tied down by difficult financial situations, you have more freedom to do what you want to do in life, without being bound by constraints – which in turn improves your quality of life as a whole. For example, if you were feeling stressed and you decide that you want to embark on a vacation, you should be able to make this happen with proper finances in order.
- Better mental & physical health
Financial stability has a direct impact on your mental and physical health. The Money and Mental Health Policy Institute states financial difficulties are a common cause of stress, depression and anxiety, with it drastically reducing recovery rates for common mental health conditions. It also states that people with depression & financial instability are 4.2 times more likely to still have depression 18 months later than people without financial difficulty. [Source] Mental health and physical health can also be seriously affected if people were to resort to cutting back on essentials, such as heating and eating, due to financial hardship.
- Better retirement options
Saving for retirement is a long-term goal, but it is important. Plan ahead for the quality of life that you wish to have as you grow older or consider how you can help your family out financially once you retire. Being financially stable ensures that you are able to tackle this early on. Keep in mind that the earlier you can save for retirement, the faster you can be financially free.
What can you do to become financially stable?
- Allocate a monthly budget and make sure you adhere to it: Without a proper monthly budget, you do not have a goal to strive towards. Once you decide on a reasonable amount, control your expenses so that you do not overspend.
- Ensure you keep regular track of your expenses: The only way to monitor your progress is by tracking how much you are spending. This helps you see exactly where your money is going and gives you a clearer picture of the next steps that you need to take.
- Increase your financial literacy & learn skills: Broadening your financial knowledge can go a long way. Learning about good investment opportunities, savings habits and more can help to grow your wealth substantially in the long run.
- Pay off your debt as soon as possible: The faster you become debt-free, the more financial freedom you will enjoy in life. Make sure to priorities any debt payments each month, so that you can work towards finishing off your loan repayments in the shortest time that is possible.
- Be mindful about your credit card usage: Credit cards can lead to a lot of unnecessary expenses if you are not careful. Make sure you are spending within your means and that you keep credit card payments to a minimum.
- Ensure you save a fixed amount each month: The importance of having savings cannot be stressed upon enough. A monthly amount for savings should be a crucial part of your budget and make sure you do save the decided amount without fail.
- Identify & eliminate unnecessary expenses: Tracking your expenditure helps you analyze and see which areas in your life require the most money. It can also help you notice any bad spending habits that you can make a note to stop, helping you reduce your expenses in the long run.