It is possible to build wealth toward retirement, living expenses, and more by having a sound plan and time to see it through. Learning the actual value of your costs and what is necessary, along with how to be financially stable, can help you live better on less, and work towards your goals.
Different investments like retirement accounts, mutual funds, and other options like real estate allow you to make money long-term. But in the short term, finding deals and cutting costs are good ways to save more money. Let’s talk about what it takes to build long-term financial stability for your family.
Why is it important to be financially responsible?
Basically, it’s important to be financially responsible so that you aren’t caught off guard when life (inevitably) happens.
Everyone has emergencies — from cars breaking down to medical expenses. And while we can’t always control where we come from, our salaries, or what happens in life, we can learn how to manage our money as best as we can.
Being financially responsible can be the difference between not worrying about money and emergencies, and getting into hundreds (if not thousands) of dollars in debt, and having to constantly dig yourself out.
What does it mean to be financially unstable?
Being financially unstable can’t be measured by just one mistake or choice.
- Constantly dealing with late fees
- Paying for overdrafts
- Having to rent or lease items because you can’t afford them
- Bouncing between credit cards in order to stay afloat in your daily living
- Spending money as soon as you get it, and not remembering what happened
- Bouncing from job to job, but not because of an increase in skills or salaries
Now, this is not to say that experiencing these items means that you’re a bad person or lazy. Money has no moral value. But, it can mean that life is a bit harder, and that working towards more financial stability can be helpful, not only physically, but mentally too.
What is a good salary to be financially stable?
This will depend!
- Do you live in a big city or small town?
- Do you have a family? Or, do you want a family or kids of your own?
- Do you plan on buying a home or retiring early?
All of these questions (and more) will decide what kind of salary you need to be financially stable.
But, many American adults said they’d need around $122,000 a year to feel in good financial shape.
In my opinion, it’s not about how much you make, but how much you can do with it. Sure, having more money is nice, but not if you’re just throwing it away on lifestyle inflation.
Why Being Financially Stable Is Important
So, why is being financially stable important? Well, when you’re financially stable, you no longer have to worry about many financial problems that can arise; including items like a job loss, cross-country move, or diagnosis.
Financial stability is basically a way to live so that you no longer have to stress over money and things.
Benefits Of Being Financially Stable
Are there any benefits of being financially stable? Absolutely!
- Be able to leave a job if it no longer serves you
- Be able to buy some wants, without sacrificing your needs
- Raise financially healthy and literate children
- Less stress (did you know that the lack of financial stability is one of the main roots of stress and anxiety/depression?)
- Better access to medical care, healthy food, and transportation
- Generational wealth
- A stable home life
- Retirement on your terms
As you can see, there are many benefits when you are able to be financially stable.
How do you become financially stable?
So, how can you be financially stable?
Other than budgeting, managing and paying down your debt, and investing, here are a few other things to try.
Negotiate Insurance Needs
Getting the correct type of insurance for your auto, home, and other needs requires understanding coverage first. From there, you can find agents and brokerages to work with and negotiate the specific requirements you may have for coverage.
Some short-term contracts or contracts cover the “whole life” of a person. So depending on your specific needs, insurance of all types should be negotiated to find the best rates.
Finding the correct type of insurance is critical in saving money and being sure that you, and your car, are taken care of. But unfortunately, people may often pay for auto insurance and not understand their coverage.
Local insurance brokers are usually a part of a bigger insurance company, so they may not have the wiggle room when it comes to claims. So keep in mind that you should always review your insurance agency.
For example, a simple review on Yelp – or typing in the brokerage’s name, such as Windhaven insurance – should give you enough background information before you even consider working with them. Just understand that if you just need basic insurance, your rates and premiums will be lower, but you’ll have much higher out-of-pocket expenses if something were to happen.
There are a ton of benefits to life insurance. For example, you can cover death and burial expenses to provide financial support to loved ones. Life insurance also allows you to protect assets. And, life insurance is classified as a creditor-protected asset, meaning that when you pass, debtors and creditors can’t take your insurance from your beneficiaries.
Life insurance can help create family wealth over time and is a great way to set your family’s financial future. Choose between term life insurance and whole life insurance (aka permanent life insurance).
- With term life insurance, premiums are often lower as they are set for the contract duration. You choose a period of years, pay the premium, and coverage lasts until the term expires.
- With whole life insurance, you’re paying for the duration of the individual’s life.
Premiums are often slightly higher and provide the added benefit of building equity in the insurance through the contract’s life. This equity is one that, upon a certain age, the individual can withdraw from the policy.
One of the most important things you can do for your financial health is pay off high-interest debts as soon as possible. That includes high-interest credit cards, loans, and other obligations.
Managing debt and paying off high-interest debts go hand-in-hand with building wealth.
In addition to life insurance, IRAs, 401k accounts, and real estate can create massive amounts of wealth over time. A little investment at an early age will compound over time, building wealth for years to come. As with life insurance, you earn more over time, depending on how long your money is invested.
Another element is the type of investment you choose, and the age you plan to withdraw the money. These will all factor into the value of your current and future investments. In general, it’s best to have both short-term and long-term investment options and develop a plan for each type of investment.
It’s Time To Be Financially Stable
Building long-term wealth for you and your family requires time and consistency so you can see your plan unfold.
Combining cutting back on unnecessary expenses, using life insurance to build wealth for your family, and utilizing investments to build wealth passively is all part of a sound strategy.
These can help you be financially stable, without extra sacrifice!
How about you? Are you ready to take the necessary steps to be financially stable??
AUTHOR Kimberly Studdard
Kim Studdard is a strategy consultant and course launching expert. When she isn't spending time with her daughter and husband, or crying over This Is Us, you'll find her teaching other mompreneurs how to scale their business without scaling their workload.