Money can’t buy happiness, but having money makes life easier. So do good credit scores. This is why financial stability is important.
Worrying about finances is not a harmless pastime. For one thing, it keeps 65% of Americans up at night. Researchers have explored the link between financial stress and personal health. Chronic stress, including financial stress, can cause many health symptoms. These include:
- Sleep loss
- Compromised immune systems
- Digestive issues
- High blood pressure
- Muscle tension
- Heart arrhythmia
Increased medical costs cause more financial stress, leading to a vicious cycle.
Another reason to strive for financial stability is so you will be able to do more in life. Buying a home requires financial stability. So does buying a new car or traveling on vacation. Financial instability can rob you of your wellbeing and make you miserable as well as ill.
What Financial Stability Looks Like
Financial stability means people can pay all their bills, have low debt, and maintain some savings for an emergency. According to Financial Health Network’s 2021 US Financial Health Pulse, only 34% of Americans are financially healthy.
5 Steps to Achieving Financial Stability
Financial stability takes some discipline but is within most people’s reach. When considering how to achieve financial stability, start with these five steps.
1. Create a Budget
Go over your bank statements for the past three months or so. List every penny you earn as well as every penny you spend. After subtracting your expenses from your income, you can see what you have left.
2. Live Frugally
When looking at your spending habits, ask yourself how much you really need to spend. Start by focusing on fixed monthly costs like rent, utilities, and car insurance, but don’t go out to eat or buy things you don’t need.
Put the money you have left after paying your bills into a savings account for an emergency. After you have 3–6 months’ worth of expenses in the bank, you can start budgeting for treats like going out with friends or buying luxuries. However, you should continue to put as much as possible into savings.
3. Use Credit Cards Properly
Credit cards have a place in a financially stable budget—but only if used responsibly. Avoid hefty interest charges by paying off your credit cards every month. If you currently have a balance, you should work out a payment plan to pay it off as soon as possible.
4. Keep Your Debt Below Your Income
Do not borrow more than you make. Your debt should never exceed your income. Excessive debt makes it extremely difficult to achieve financial stability.
5. Pay Yourself First
When you get paid, the first step you should make is to contribute to your savings account. Many banks will let you do this automatically, so you are not tempted to use this money for other things.
Pursue Financial Stability
Financial stability makes it easier to do the things you want in life. You might need to make some significant changes to how you approach money, but once you’re less stressed, sleeping better, and enjoying more freedom, it’ll be worth it. Start your journey to financial stability today.