Becoming financially stable have different interpretations for most people. Having high or low income does not guarantee financial stability.
A lot of people set goals towards being financially stable but despite knowing the importance of financial stability as a low income earner, getting started can be difficult.
In this article, we will be discussing how to become financially stable as a low income earner.
What is financial stability?
Financial stability is the ability to make enough money, set aside savings and live comfortably. This is about preparation and confidence. By creating multiple streams of income and keeping track of all your expenses through budgeting can help anyone in achieving financial stability over the long run.
Financial stability is about building a financial system that can function in good and bad economy. It is also a system that meets the need of average families that are working and in business to meet certain financial goals like buying a house or access to loan to boost existing business.
Who is financially stable?
Someone that makes enough money to cover all their bills and expenses, keeps proper record of all their finances daily, monthly and annually with proper spending habits and have figured out a way to save and invest some percentage of income from their earnings.
It does not take much money to live well if you are debt free. Learning how to protect your money by sharing your gifts, talents and time with people can also ensure financial stability.
Knowing where you are starting from, tracking your progress and concentrating all your financial transactions in one place with the help of apps ensures stability in your finances.
What does it mean to be financially stable?
Ability to manage financial imbalances and be fully prepared for whatever financial problem you face is an indication of stability in your finances.
Stability is a way to endure by being adaptive when you need to with proper budgeting which is essentially your road map to your stated goals. When your assets and investments covers all your expenses, you can be considered financially stable.
Being completely debt free and having the ability to pay monthly living expenses and having some money left over to do whatever you wish is a good sign of being financially stable.
Importance of being financially stable as low income earner
- Helps to sort your basic financial means without being stressed as a low income earner.
- Having a lot of money left over each month after your basic needs are met
- Helps save and invest some percentage of your income
- Freedom from debt: Any debt you have is basically taken away money from you every month.
- Having money for all that you need to thrive now and in the future.
- Ability to purchase asset now and in the future
- Ability to move beyond paycheck to paycheck.
9 Steps to become financially stable as a low income earner
1. Start sacrificing your wants: Stop blowing all your paychecks on impulse buying and prioritize your needs. Think long term and compare how much you are earning to how much you are spending. When you prioritize your needs as a low income earner, extra money to save and invest will be not be difficult to get.
2. Plan your income: Create a realistic goal and an action plan you can work towards. Set yourself up for realistic success with your budgeting and saving style and prioritize every plan from your income.
3. Cut or reduce your expenses: Reduce the amount you are using on your fixed and variable expenses. Learn to live on less than you earn. Spending more or equivalent to what you are earning will sink you into debt in the nearest future.
4. Break bad money habits: A lot of people failed in managing their managing their money as a low income earner. The more money they earn, the more they increase their spending due to bad money habit.
5. Find a job that covers all your bills for the month and save some: This step is crucial because having a job that covers all your bills prevents you from sinking into debt. It also gives you confidence that all your expenses will be sorted out.
6. Pay down all bad debt: Paying down all bad debt or moving closer to being debt free is one of the closet ways to become financially stable. When you owe people money, you are subjected to high interest. You have to make payment every month and that is money that could be going towards your savings account to achieve financial goals. Get all your bad debts out of the way and start planning towards financial stability as a low income earner.
7. Save towards you financial goals: Working towards financial goal is an important step towards financial stability. Start saving towards your goal and be prepared for your future.
8. Have good credit rating: When you have good credit score, you get access to better things like lower interest rate if you want to borrow money. When you apply for loans, you are able to negotiate better. Overall good credit rating gives you access to apartment approval, mortgage approval and quality of life gets better for you. Your financial situation also gets a boost.
9. Be disciplined and consistent: Being consistent towards setting some funds aside can help you with your finances. Financial stability helps you cover unexpected bills for two to three months without being stressed financially.
In conclusion, money is the key to becoming financially stable and independent. A little money set aside every month from your income can add up quickly to stabilize you financially. At times you end up spending more money when you failed to learn how to be financially stable.
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