Tomorrow may be too late to start managing your finance if you want to be financially stable.
Now that you have the means, how do you prepare to sustain yourself against the unforeseen?
If you need to deal with emergency expenses, it doesn’t make sense if after your long years in service you have nothing to fall back on.
A man applied for the position of a factory worker after losing his fifteen years of uninterrupted banking job. He would have ended up being the chairman of his own company but because he had no savings, he ended as a factory worker.
During our discussion, the man confessed seeing no need to manage his income. He thought it would always be rosy because he never saw the danger coming.
How could someone enjoy an “easy life” throughout his fifteen years of a white collar job and he’s still not financially stable?
Why Need to Manage Your Finance?
If you manage your finance very well, you have the following advantages:
- Debt Free: You’ll be able to pay pressing bills as at when due and save yourself from embarrassment;
- Soft Landing: There’ll be no mental stress when you have a delay in receiving your salary; and
- Financially Independence: You’ll relieve yourself from the urge of needing a loan or support from neighbors, friends or family who are not supposed to know what’s happening in your life.
If you end up saying “I’m broke!” when you need to pay rent, children’s school fees or stock your kitchen with food, where did your money go?
When you don’t have the means to deal with your immediate needs, it means you’re not managing your personal finance very well.
Your money is not a spirit that can disappear when you need it. You spend your money yourself, no spirits help you spend it. So you should know how you spend it in order to be in control of your finance.
You can fix this problem and now is the best time. You shouldn’t be paying debts when you’re supposed to be enjoying your life.
As you read on, you’ll know what’s wrong and what you need to fix.
But first of all, let’s briefly look at what financial stability is or what the situation looks like when you’re not financially stable.
What’s Financial Stability?
Financial stability simply means the situation whereby you don’t lack money to deal with expenses that you don’t plan for.
You’ll be able to take care of unplanned expenses if you have savings and make a budget for how you’ll spend your money.
As each month ends, create a budget on a certain percentage of your income to cater to your immediate needs and save the rest for future needs.
By so doing, you have no cause to borrow money when you’re in an emergency situation.
In other words, to be financially stable isn’t by the amount of money you earn, the kind of job you do, the kind of life you live or the kind of school your children attend.
What the Situation Looks in Other Way Round
If your standard of living costs more than your monthly budget, there’ll be no money left to save for the month.
Let’s say your monthly income is $100 and your expenses reaches $150 before the end of the month, it means you have a debt of $50 to settle in the coming month.
And when you collect your salary and deduct $50 to offset your debt, you’ll be left with $50, which might not be enough to sustain you for the whole month.
This means, you need extra $50 or more to deal with your regular expenses for that month.
You can’t be financially stable if this is how you live.
In fact, your problem won’t only be inability to settle your sudden and unplanned expenses but also to clear bulky debt.
God forbid, if you lose your job or retire suddenly, it means you won’t have money to fall back on except your last salary.
Sometimes ago, I spent my salary before receiving it and at the end of the year my debt was times two of my salaries for the whole year.
I was always broke and didn’t know what to do until I came across what I’m about to share with you in this post.
You don’t have to drown in debt like me or retire having no savings like the other man before you can learn how to manage your finance and be financially stable.
Two Habits of A Financially Stable Person
There’re two important habits among others, which can make you successfully manage your finance and be financially stable.
Naturally, when you have money, the next thing that comes to your mind is to spend it. You’ll have the urge to buy everything as they appeal to you.
If you’re not patient enough, you’ll realize that half of what you buy is luxury.
Impulsive spending however leads to waste of money.
Let’s say you’re using a windows laptop and someone approaches you to buy an iOs laptop. Because the latter is in vogue, you’ll feel the urge to replace the old one.
Your patience will help you resist the urge and have a thorough planning before taking a purchasing decision.
In fact, it’s possible you find an alternative or even realize you don’t need the stuff if you don’t rush for it.
If you keep buying everything for the sake of buying it, you won’t be able to save for the future.
All you have to do is to train yourself on how to let go of things that won’t cause you any serious damage if you forego them.
Before you can be financially stable, you also have to be diligent.
Let’s say you want to buy a car and start saving money for it, it’ll be wrong for you to spend in that money on something else.
The best way to achieve this is to set a target for yourself and direct your budget towards it. That can motivate you in managing your finance and make sure nothing changes your plan.
It’s not easy to have money and keep it in the bank.
When you see your friends buying new cloths or new gadgets, don’t be intimidated. Your choices can’t be the same. Let them buy whatever they want to buy. When the timeline passes, you too will buy your own car.
This can be a difficult task but you have to do it in order to achieve your goal.
You’re not punishing yourself for being diligent, you’re only being self-disciplined.
If you have your money, nothing stops you from spending it. But because you have a budget, it’s a wise choice not to spend it if your budget says you shouldn’t spend it.
How To Be Financially Stable
If you can do the following, you’ll be financially stable when you have enough fund in your reserve to deal with unforeseen expenses.
1. Make Budgets
The best way to be financially stable is to have a good plan on how to deal with your bills based on a certain percentage of your income. And then save the rest to prepare for bigger goals like children’s school fees, buying a car, building a house, retirement, and so on.
If you don’t make a budget for all your goals, it means you’ll spend your income as you make it and have nothing in stock for the future.
Read Budgeting Tips for more details on how you can manage your income and be financially stable.
2. Manage Your Debt
And the more loan you take, the bad your finance.
If your salary is $300 and you have already taken a loan of $250 at the beginning of the month, you’ll be left with $50.
But because $50 can’t sustain you, to pay back is difficult. And then you default.
That’s not the best way to manage a debt.
There’re many ways to manage your debts and set yourself free. If you manage debt appropriately, you’ll be financially stable.
What’s important is while you on loan, reduce your expenses. So that you can have enough balance on your account to eliminate your principal balance.
3. To be continued…