Build Financial Stability With These Smart Money Habits

A recent survey indicates that 70% of Americans consider themselves financially unstable. Unfortunately, many people think that making more money is the only way to improve their financial position. While that’s certainly one option, the current economic climate makes it a bit difficult to go out and land a higher-paying job.

Fortunately, there are some steps that you can take to build financial stability. Learn more about # of those tips today.

Create a Budget

If you’ve been researching money tips and how to improve financial stability, you’ve undoubtedly seen the importance of making a budget. However, a spreadsheet with your monthly expenses and income isn’t enough on its own to get the job done.

Instead, you need to create a realistic budget and be prepared to stick to it, even if that means saying no to some things that you would like to do.

Be ready to review your budget regularly to determine if there are areas that you need to adjust. It’s also a good idea to estimate your monthly bills a bit higher than they usually run.

Also, if you’re an hourly employee, budget for the least number of hours that you can reasonably expect to work, so anything above that number gives you more financial wiggle room.

Build an Emergency Fund

According to Bankrate, some 56% of Americans can’t afford an unexpected financial emergency that costs more than $1,000. This includes everything from problems with a vehicle to health crises.

Tragically, this inability to cover a financial emergency means that more than half of Americans are one unforeseen financial problem away from overdrafting accounts or accruing more debt on their credit cards.

One of your first steps should be to establish an emergency fund. Even if you don’t have $1,000 to designate as your emergency fund at the beginning, start putting as much money as you can into this fund.

When you reach $1,000, you can reduce the amount that you put into it every week, but it’s still a good idea to add some cash to it each week. The more money that you have in your emergency fund, the better equipped you’ll be when an unexpected cost arises.

Pay Yourself First

Instead of viewing your savings account as something that you’ll put money into if there’s enough left at the end of the month. That’s backwards logic. One of the best ways to improve your financial stability is to start treating your savings account as though you’re paying yourself.

Having a high-yield savings account allows you to turn your money into more money more quickly than a traditional account. It’s also a much better method than trying to save money by putting it in an envelope or box in your home.

Eventually, your goal should be to have multiple types of accounts that you’re putting money into every month. High-yield savings accounts, retirement accounts, and a designated vacation account can all help you create a more secure financial situation for yourself.

Manage Your Debt Wisely

There are loads of budgeting tips out there that offer different strategies for getting your debt under control. Some strategies include starting with your smallest debt and “snowballing” your way up. Other strategies involve tackling high-interest debt, like credit cards, first and then working your way toward debt that doesn’t accrue interest, like medical debt.

Ultimately, the strategy that you choose is completely up to you.

The most important aspect is sticking to the path that you choose. You don’t want to focus on low-interest debt for two months and then switch to another type of debt in the next couple of months. Once you make a plan, stick to it unless you have indelible proof that it isn’t working.

Avoid Lifestyle Inflation

When your financial situation improves, it’s easy to start spending more money. This is why many people who assume that making more money is the best way to improve financial stability end up not making any progress. If you don’t have a plan in place for what you’re going to do with every dollar that you make, it’s easy to start spending the newfound money in your account.

When you start paying off debt, don’t start spending the money that you free up by paying off an existing debt.

Instead, continue to use it to either attack another debt or put it into an account that earns interest. Inflating your lifestyle because things are starting to look better in your financial future will lead to you ending up right where you started.

Set Goals

Finally, you’re much more likely to remain committed to the process when you have clearly defined goals. While your financial stability will impact your long-term future, it’s important to have some short-term goals that you can reach along the way.

For instance, having a $1,000 emergency fund like we discussed earlier or paying off the first debt on your list. Make a list of these goals, and once you reach one of those goals, acknowledge it. Celebrate your successes along the way.

Financial Freedom Is on the Horizon

No matter how long you’ve spent trying to dig yourself out of the proverbial hole, financial freedom can become a reality for you.

Whether you’re dealing with financial insecurity because of an adversity that was out of your control or you’ve made some poor decisions in the past that have put you in a bad position, there is still hope.

By implementing some changes and taking control of your money, you can put yourself in a position to prosper.