5 Ways to Be More Financially Stable This Year
In order to become financially stable and solid, one must spend less and earn more. You can progressively increase your money until you have a comfortable nest egg by making persistent investments and savings. Also, you are no longer required to work.
But I know that setting aside a sizable portion of your money is so difficult!
If it was easy then many people would be financially free or millionaires. The fact is, “spend less, earn more” is a mindset that you must have in order for you to achieve financial stability.
- Change Your Money Mindset
Steer clear of the “I deserve this” attitude.
Yes, you earned your money by hard effort. And for that reason alone, you should not waste it. Do not struggle to keep up with your neighbours or compete with your friends.
It’s not necessary to travel on vacations to post for the Gram or visit the mall during the big sale, and sample every food truck near the office. Try not to give in to peer pressure when it comes to eating out, travelling, or shopping. Rather, consider the following:
What is my true desire? And what little steps may I take to obtain it?
That’s a more grounded way of thinking. It also guarantees that you receive what you desire rather than what is expected of you.
2. Focus on Income Generating Assets
Concentrate on generating consistent revenue.
Focusing on income-generating assets can provide financial stability and create passive streams of revenue, reducing reliance on active income sources. These assets often appreciate over time, offering a hedge against inflation and the potential for long-term wealth accumulation.
Seek out chances to increase your income. You can pick up employable talents. Invest to grow your money compounded.
3. Create an Emergency Fund
Even a modest emergency fund can contribute to our stability. Ideally, you should have a savings account that is securely stowed away with at least six months’ worth of spending.
Building up your emergency savings doesn’t have to happen all at once.
You may begin with a more achievable goal, like saving up £500. From there, you can progressively raise it. That’s how you create a safety net and achieve financial stability in a sustainable manner.
4. Be Free from Debt
Think of your freedom. If you had any debt at all, it would ideally be your mortgage. Consumer product debt is an extremely poor type of debt.
If you already have debt, set aside a portion of your salary to make monthly payments on it so that you don’t accrue more.
Having money gives you choices. You forfeit some of your freedom each time you spend money. Thus, try not to waste your freedom on items that you don’t actually need or desire.
5. Separate your Accounts
Consider adopting the 3 account strategy:
The 3-account strategy is a financial approach that involves managing three main types of accounts for various financial needs: a checking account for everyday expenses, a savings account for short-term goals and emergencies, and an investment account for long-term growth. This strategy aims to streamline finances and optimize money management by allocating funds appropriately among these accounts.
I personally have multiple bank accounts. I dislike having just one since it makes money management challenging.
I use the three-account method:
I. The standard checking account is what I use to pay for little items like groceries. I personally limit my holdings to $800 or less. The precise amount is determined on your situation. What matters is that all of your expense funds are in this account. This stops you from impulsive buying and overspending.
II. The fixed costs account, which includes bills and mortgage payments. I automatically deduct everything I typically pay for from this account. You can see just how much your cost of living is when you have this account.
III. The savings account: Most people use their earnings to cover their bills after spending their money. What was the outcome? No financial savings. I advise setting aside the same sum each and every month. It all comes down to developing the habit. Additionally, turn everything on autopilot so you won’t even need to consider it.
Remember: Money gives you freedom and options. Every time you spend your money, you give up a portion of your freedom. So avoid wasting your freedom on things you don’t need or genuinely want.
