Being optimistic about your finances is only natural. Most people have high hopes concerning their job prospects, lifelong earning capacity and financial management skills. But, reality might have another plan.
What Is Financial Stability?
Financial stability is both an objective and subjective quality. The objective standard is having an income that is higher than your expenses. You must make more money than you spend.
But, the subjective character is based on your financial status. Most people will admit that rich people have a different life style than others. For many of them, they can coast for a while before the day of reckoning arrives.
But inevitably, it will arrive. Everyone pays the piper. So, even though the wealthy have a higher income, they also must develop wise management skills. We will discuss a few of these.
Make a Budget
Musicians practice, athletes practice … pretty much anyone who wants to succeed practices and prepares a plan. How can you control your expenses, when you don’t even know what your credits and debits are? You need to start by making a budget.
Some people don’t want to face financial reality. They want to believe that they are wealthier than they are. We see this a lot with athletes and celebrities. When their salad days are over, they might file for bankruptcy.
If you fail to plan, you plan to fail. = Benjamin Franklin.
Create a budget. If you are continually dipping into your savings, then you know you are not making ends meet. And, something that cannot go on forever, will not go on forever.
Write down your expenses and income. Then, see what your surplus or deficit is. Decide how you are going to make up that deficit.
You might try to add more hours at work. Or, you might consider taking out a personal loan. Saving money requires having higher income than expenses.
Balance Your Cheque Book
Once you have a planned budget, see how you are doing each month. Balance your cheque book. Many people assume that bankers are never wrong. But, they do make mistakes.
After balancing your cheque book, you can identify any errors made by your bank. This also gives you a better understanding of your spending habits. You need to know how you spend money before you can improve your money-spending habits.
Count Pennies
Remember the parable of the grasshopper and the ant. The grasshopper liked to visit the grocery store in the middle of the week and throw large parties. He had a great bar-be-cue, but didn’t produce anything of note.
While, grasshopper partied, ant was working hard, storing up food for winter. Grasshopper wondered why ant worked so hard. Ant told him that when winter arrived, those who stored away wealth would survive. Eventually, winter arrived and ant had plenty of food stored up while grasshopper starved.
How will you reap, when you have not sown?
Those who save money, count their pennies. If you need help calculating your pennies, then you can use the Acorns App. Financial management has never been easier.
This money management app helps you earn found money, grow your knowledge, invest for your future and spend smarter. It is like having a financial assistant with you all day long. Sometimes, people need a little nudge to improve their saving habits.
Cut Corners
Paying off debt requires both a physical and spiritual commitment. Physically, if you don’t have enough credit, then you need to reduce your debt. You need to cut corners.
Enjoy some home cooking and reduce your visits to five-star restaurants. You might want to watch an old movie on date night. Reduce your expenditures to create a better threshold for your budget.
Find New Income Sources
Sometimes, debtors need a little financial boost to help them regain their composure. When you are priming a pump, you introduce a similar liquid to draw out the liquid. Find new income sources to increase your cash flow.
After you learn more about personal loans, you can find the best financing means. Use the new funds to pay off the bills with the highest interest rates. Compound interest can quickly drag you underwater, like a drowning swimmer.
Create Rainy Day Fund
You wear a seat belt just in case you get in an accident. A rainy day fund can help you overcome little glitches in the budgeting process. For example, your rent is probably due the beginning of the month, while your pay cheque arrives every two weeks. Sometimes, these two periods of time don’t mesh perfectly.
Instead of incurring late fees, create an emergency spare cash fund. You might even include a full month’s rent. This ensures that you are always on time.
Landlords and bankers expect you to pay your bills on time. They have a very fine-tuned system that will deposit the funds into their bank accounts immediately. There is a “Domino Effect” when they’re not paid – managers ask where the money is.
A rainy day fund smooths over many rough edges. It can be used to keep everyone happy. Toss a $20 therein when you get paid.
Healthy Financial Management Skills
Changing bad financial management habits can take some time. Psychologists believe that the development of good skills might take at least two weeks of constant repetition. Send yourself an alert from your smart phone, urging you to save more every single day.
After two weeks, there is the hope that this new habit will be well-ingrained. Use a multi-dimensional strategy for regaining financial stability: make a budget, cut costs and find new income sources. Develop healthy financial management skills to pay off your debt. Then, you can sleep better at night.
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