How to be financially stable

How to be financially stable

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Part of the series “Parenting for Success”

In raising my own teen children and helping them plan for college and the future, I’ve realized that, for many parents, it’s all too easy to pass on to our children our own blocks, mistakes and blind spots around money and financial health. Sadly, that can be crippling for a young adult, as we’re failing to provide them with the necessary foundations for building a happy, healthy, and productive relationship with money.

To learn more about the steps college students should be taking to create financial stability and literacy, I was excited to catch up with Brendan Coughlin, Citizens Bank’s Head of Education Finance to discuss what students can do today.

Kathy Caprino: Brendan, are you finding that college students are generally financially literate today?

Brendan Coughlin: Despite recent efforts that mandate financial literacy programs are taught in public schools, many students are still graduating high school and heading to college with little knowledge of these vital skills. In fact, one in six American teenagers are unable to make simple decisions about everyday spending , according to a recent study by the OECD. This can become especially dangerous in college when poor financial skills can lead to dangerous overspending and debt.

Caprino: So what should new and graduating college students do to build their financial skills, and begin planning for financial stability in the future?

Coughlin: Fortunately, this is a ‘fixable’ trend, and with school about to start-up again, now is the perfect time for incoming and returning college students to begin learning how to manage their finances.

Here are 7 simple tips for college students to take to build fiscal responsibility and create healthy money habits:

1. Build a budget.

It may sound simple, but by keeping a budget, students will be accountable for their spending and can avoid overspending. Start with your fixed expenses, such as tuition and rent, and see how much you have left over. Next, calculate how much you’ll need for one-time purchases at the beginning of the semester, like dorm supplies and books. Whatever is left over can be allocated to food, eating out and entertainment. Remember, while your friends may spend $100 in one weekend on eating out, you need to focus on your budget, not your friends’ spending habits.

Once your budget is in place, be sure to keep track of everything – the safest way to avoid unnecessary overspending is to remain cognizant of every purchase. It will also allow you to quickly see if you’re spending too much in one area. There are apps and easy tools available today to help you keep track, such as Mint, BudgetBoss and LearnVest.

2. Open a checking account with a debit card.

In line with developing realistic budget goals, using a debit card allows you to only spend what you have, making for more accurate budgeting and ensuring you won’t end up with high debt, unlike with a credit card. Be sure to understand how your bank processes transactions and sign up for overdraft fee protection if you can.

3. Take advantage of your student ID.

Many colleges offer advantages and perks for students through their ID cards. Having your student ID tied to discounts at local and on-campus stores is a great way to spend less on items you’re already likely to buy, such as books or lunch. Suddenly, shopping for necessities around campus can begin to easily translate to added savings. Most colleges will offer a list of participating stores on their website, so check online before you leave for school so you know where to go.

4. Choose (and use) a credit card wisely.

When you’re in a costly emergency situation, it can be really handy to have a credit card. It’s also a great way to pay off a purchase over a month or two when you don’t have access to all of the necessary cash at once. That said, it’s vital to do your research before signing up for a credit card. Pick the card that has the best offers for your financial situation – whether it’s a low- or no-interest rate for a year or a perks card. Last, always be sure to pay off the balance or at least more than the minimum each month, so you don’t end up owing more than the original price of the charges with accrued interest.

5. Find an on-campus job before you arrive.

College life is expensive and students flock to the convenient and popular supply of on-campus jobs. The popularity is well-deserved, as many jobs fit within class schedules and transportation limitations of students. Be sure to check online for your college’s list of available jobs before you get on campus – they go quickly!

6. Become a saver.

Getting a job can provide working experience, but it is also an opportunity for students to start developing the habit of “paying yourself first.” By setting up automotive savings, students can begin to understand the value of saving for special occasions, big purchases and unexpected emergencies.

7. Think ahead.

While the previous tips have been geared toward first-time and returning college students, this last one is targeted toward students entering their final year. College is one of the biggest investments you will make in your life and most students will graduate with some amount of student loan debt.

According to a new survey, 94% of parents with a child in college and students are concerned about the rising cost of college. Yet, only 63% of college students and 55% of parents with a child in college have a plan to pay for student loan debt. So, take the time to familiarize yourself with when, and what, your payments are going to be after you receive your diploma. Several banks, including Citizens Bank, automatically send borrowers a Student Loan Annual Summary that reiterates their loan amount and interest rate to help borrowers stay informed about their borrowing. There are also many repayment options available to student loan holders which let borrowers refinance loans at a potentially lower rate. This can help them reduce their monthly payments and free up money for other endeavors.

College is loaded with new experiences —and while it’s important to get involved with activities, meet new friends, learn and have fun—it doesn’t have to involve extravagant spending. Students with basic financial know-how can learn to take their finances seriously. With practice and time, students can learn these vital skills that they will carry throughout their lives.

Sometimes it may feel like becoming financially stable is impossible. The bills keep coming and the amount of income coming in doesn’t add up to the money owed. I have watched my parents struggled with money my whole life and can say I have been on both sides of the financial spectrum. I identify those sides as struggling and not struggling. Here are a few tips to becoming financially stable.

How to be financially stable

10 Ways to Become Financially Stable

1) Track your expenses. Write down/record what you are spending in two week’s time. Take a look at your bills and figure out what you paid on average for the last 6 months. Record your household income. You need to know what you are spending. Yes, saving receipts is a pain in rear end, but knowledge is power. For years we used Mint…and we switched in January to You Need a Budget (YNAB). I tried really hard to like Mint more than YNAB, but I have fallen into love with YNAB. Since we started using it we have come much closer to hitting all of our savings goals.

2) Compare your household income to your expenses. Are you spending more than you make, breaking even, or saving more than you spend each month? You need to know what you are making each month and compare it to what you are spending.

3) Start an Emergency Fund. Tuck $1,000 away in a safe place. Make this goal a priority and try to accomplish it within a few months. Dave Ramsey is a very smart guy, and this is the start of his advice to snowballing debt. The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness is a MUST READ – even if you borrow it from the library.

4) Start paying with CASH! You cannot spend what you do not have. Spending cash makes you think twice because you only have a certain amount of money allotted each week. You have to stretch you money to fit all your needs needs. You may find it easiest to use an envelope or jar system to keep track of your money.
How to be financially stable

5) Stop the money wasters. Do you really need that coffee on the way to work? Can you pack a lunch from home? Those nickels, dimes, and dollars add up to a big amount when you total them together. Once you have your debt paid off then you can eat out more.

6) Reduce your fees. Cancel credit cards that charge an annual fee. Close any bank accounts that charge you a monthly fee and switch to a credit union. Schedule your bills a week before the due date to avoid any late charges.

7) Ask yourself “Do we really need this?” and cut it/get rid of it if you do not. Think about Redbox or Netflix on a Roku instead of pricey cable/satellite each month. Opt to cut the home phone and go with a cell phone to save money (or vice versa).

8) Shop around. It’s true, you should shop around for rates for services such as automobile insurance, cable, telephone, natural gas, telephone, and cell phone. I was completely dumbfounded when my dad told me he pays $100 a month for his cell phone – and he does NOT get the internet on it. Technology is always changing and it is important to do a little research to make sure you are not putting more money in to one service than you should be.

How to be financially stable

9) Make a meal plan and stick to it. Use coupons when you shop to reduce the amount you are spending on your grocery bill. Start price matching if your store allows this, that way you can reduce your trips to multiple stores.

10) When shopping online combine online coupons with cash back sites like Ebates or TopCashBack. Use apps including Checkout 51 and Ibotta to save money on the purchases that you make in store.

How to be financially stable

Do you have other tips for helping people become financially stable?

How to be financially stable

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Filed Under: Ways I Save Tagged With: Ways I Save

If you want to secure your future, you need to prepare for it as soon as possible. The uncertainty that you face should prompt you to take care of yourself and the means for you to have a good future. If you are married and with kids, it is all the more reason for you to ensure that you are financially capable of facing any emergency situation.

That is not really complicated to grasp but when you are burdened with debt, that is another story. Having to deal with debt put a couple of obstacles in your way. Given that idea, you know that your debt and a good future does not match.

What is financial stability

What you need right now is financial stability. But what exactly is it?

Financial stability is oftentimes confused with financial independence. In truth, they are quite similar except that stability requires more from you. When you are financially independent, you have the monetary means to buy what you need, when you need it. Being in this financial condition means you do not have to borrow money or ask it from someone else. The same is true for financial stability. However, as mentioned, the latter requires more. To be truly stable means even the unexpected expenses are taken cared of. You have prepared yourself so that you will not be ruined by any financial difficulty that is caused by external forces.

Usually, we get ourselves in debt because of our wrong decisions. However, there are also external factors to consider. These include:

an economy collapse

rising costs of living

a health condition

These are only a few of the things that could happen. This list could be longer if we make a survey of what the Americans experienced during the recession.

The bottomline is this, financial independence means you have the income to buy what you need to survive. When you are financially stable, you have the income and apart from that, you have the savings to finance any unexpected situations that require it.

How to be financially prepared for your future

Obviously, the better option between the two is financial stability. While financial independence may have been acceptable before, we all realized that after the recession, it is really not enough. If you really want to be financially prepared for your future, you know that you need to stabilize it.

Fortunately for you, being financially stable involves two simple concepts: paying off your debts and saving.

Paying off your debts

As mentioned earlier, a good future does not have room for your debt so this is one of the things that you must get rid of. It may seem like a daunting task but if you take it one step at a time, you should be able to accomplish your goal.

You have a lot of debt relief options to pay off your debt. Here are the most common.

Snowball method. This requires you to rank your debts according to priority. You pay the minimum for all the debts while putting all your extra money into the priority debt. That allows you to pay that off faster. When that first debt is done, you get the freed amount and you transfer it to the next priority debt while maintaining the minimum on the rest.

Debt consolidation. This type of debt relief option can come in two methods: debt consolidation loan and debt management. They will both provide you with a low single monthly payment scheme that is stretched over a longer payment period. The lower contribution is possible because of the longer term and a possible lowering of interest rate.

Debt settlement. This debt relief program focuses on debt reduction. You will convince the creditor that you are in a financial crisis so they will allow you to pay only a portion of your debt and have the rest forgiven.

Bankruptcy. This is usually advised as a last resort because of the credit score implications. It can go two ways. One is Chapter 7 wherein your assets will be liquidated and used to pay your creditors. Anything not paid will be discharged. The other is Chapter 13 wherein you will be subjected to a repayment plan by the bankruptcy court.

How to be financially stableGrowing your savings.

There are many benefits to having more than enough savings and financial stability encompasses all of them. When you have your savings, you can be assured of the following:

Medical funding in case someone gets sick.

Ability to pay for any home or car related repairs.

Protection for your debt payments and other basic necessity costs since emergency situations will not have to disrupt your usual budget.

Back up plan for your day to day expenses in case you lose your job.

Investment funds – in case you want to grow your money.

These are only a few of what you will get when you have enough savings. If none of these happen, you can always put your savings into your retirement fund. A lot of the pre-retirees are in a difficult financial situation because they did not give much thought to being financially stable. Come retirement, they had to delay it so they can continue working and thus have enough to pay what they owe. Be kind to your future self and see how much you need to retire comfortably. Although you will receive benefits like your social security, that may not be enough.

It pays to do your research and know what you can do to deter any financial crisis. Check out the Benefits.gov website to see the different grants and financial assistance that you can use. Anything that you cannot get here, must be prepared for through your savings. Grow your savings up to an amount that you are comfortable with. It pays to be prepared and nobody ever regretted planning for the future.

National Debt Relief is one of the largest and best-rated debt settlement companies in the country. In addition to providing excellent, 5-star services to our clients, we also focus on educating consumers across America on how to best manage their money. Our posts cover topics around personal finance, saving tips, and much more. We’ve served thousands of clients, settled over $1 billion in consumer debt, and our services have been featured on sites like NerdWallet, Mashable, HuffPost, and Glamour.

How to be financially stable

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Part of the series “Parenting for Success”

In raising my own teen children and helping them plan for college and the future, I’ve realized that, for many parents, it’s all too easy to pass on to our children our own blocks, mistakes and blind spots around money and financial health. Sadly, that can be crippling for a young adult, as we’re failing to provide them with the necessary foundations for building a happy, healthy, and productive relationship with money.

To learn more about the steps college students should be taking to create financial stability and literacy, I was excited to catch up with Brendan Coughlin, Citizens Bank’s Head of Education Finance to discuss what students can do today.

Kathy Caprino: Brendan, are you finding that college students are generally financially literate today?

Brendan Coughlin: Despite recent efforts that mandate financial literacy programs are taught in public schools, many students are still graduating high school and heading to college with little knowledge of these vital skills. In fact, one in six American teenagers are unable to make simple decisions about everyday spending , according to a recent study by the OECD. This can become especially dangerous in college when poor financial skills can lead to dangerous overspending and debt.

Caprino: So what should new and graduating college students do to build their financial skills, and begin planning for financial stability in the future?

Coughlin: Fortunately, this is a ‘fixable’ trend, and with school about to start-up again, now is the perfect time for incoming and returning college students to begin learning how to manage their finances.

Here are 7 simple tips for college students to take to build fiscal responsibility and create healthy money habits:

1. Build a budget.

It may sound simple, but by keeping a budget, students will be accountable for their spending and can avoid overspending. Start with your fixed expenses, such as tuition and rent, and see how much you have left over. Next, calculate how much you’ll need for one-time purchases at the beginning of the semester, like dorm supplies and books. Whatever is left over can be allocated to food, eating out and entertainment. Remember, while your friends may spend $100 in one weekend on eating out, you need to focus on your budget, not your friends’ spending habits.

Once your budget is in place, be sure to keep track of everything – the safest way to avoid unnecessary overspending is to remain cognizant of every purchase. It will also allow you to quickly see if you’re spending too much in one area. There are apps and easy tools available today to help you keep track, such as Mint, BudgetBoss and LearnVest.

2. Open a checking account with a debit card.

In line with developing realistic budget goals, using a debit card allows you to only spend what you have, making for more accurate budgeting and ensuring you won’t end up with high debt, unlike with a credit card. Be sure to understand how your bank processes transactions and sign up for overdraft fee protection if you can.

3. Take advantage of your student ID.

Many colleges offer advantages and perks for students through their ID cards. Having your student ID tied to discounts at local and on-campus stores is a great way to spend less on items you’re already likely to buy, such as books or lunch. Suddenly, shopping for necessities around campus can begin to easily translate to added savings. Most colleges will offer a list of participating stores on their website, so check online before you leave for school so you know where to go.

4. Choose (and use) a credit card wisely.

When you’re in a costly emergency situation, it can be really handy to have a credit card. It’s also a great way to pay off a purchase over a month or two when you don’t have access to all of the necessary cash at once. That said, it’s vital to do your research before signing up for a credit card. Pick the card that has the best offers for your financial situation – whether it’s a low- or no-interest rate for a year or a perks card. Last, always be sure to pay off the balance or at least more than the minimum each month, so you don’t end up owing more than the original price of the charges with accrued interest.

5. Find an on-campus job before you arrive.

College life is expensive and students flock to the convenient and popular supply of on-campus jobs. The popularity is well-deserved, as many jobs fit within class schedules and transportation limitations of students. Be sure to check online for your college’s list of available jobs before you get on campus – they go quickly!

6. Become a saver.

Getting a job can provide working experience, but it is also an opportunity for students to start developing the habit of “paying yourself first.” By setting up automotive savings, students can begin to understand the value of saving for special occasions, big purchases and unexpected emergencies.

7. Think ahead.

While the previous tips have been geared toward first-time and returning college students, this last one is targeted toward students entering their final year. College is one of the biggest investments you will make in your life and most students will graduate with some amount of student loan debt.

According to a new survey, 94% of parents with a child in college and students are concerned about the rising cost of college. Yet, only 63% of college students and 55% of parents with a child in college have a plan to pay for student loan debt. So, take the time to familiarize yourself with when, and what, your payments are going to be after you receive your diploma. Several banks, including Citizens Bank, automatically send borrowers a Student Loan Annual Summary that reiterates their loan amount and interest rate to help borrowers stay informed about their borrowing. There are also many repayment options available to student loan holders which let borrowers refinance loans at a potentially lower rate. This can help them reduce their monthly payments and free up money for other endeavors.

College is loaded with new experiences —and while it’s important to get involved with activities, meet new friends, learn and have fun—it doesn’t have to involve extravagant spending. Students with basic financial know-how can learn to take their finances seriously. With practice and time, students can learn these vital skills that they will carry throughout their lives.

“How can I afford retirement?” It’s a question that probably crosses everyone’s mind at some point. In fact, having insufficient retirement funds is the single biggest financial worry of 66 percent of Americans.

Unfortunately, far too many people leave this issue as something to worry about and fail actually to make a plan to be financially successful in retirement. However, it’s never too late to plan your retirement savings strategy. Even if you’re already in your 50s, you still have a good 10 or 15 years to save, and that can make a meaningful difference.

If you want to make sure you’re financially stable in retirement, here’s a look at some tips that will help you prepare, and you can implement some of them right away.

How to be financially stable

#1. Get Started

One of the most important parts of making sure you’re ready for retirement is to get started saving. Now. Thirty one percent of working adults say they have no retirement savings at all. And while that number does decline as age increases (90 percent of working adults over the age of 45 have at least something saved for retirement), it’s still true that some working adults haven’t saved anything at all.

If you feel like it’s too late to start saving for retirement, don’t underestimate how quickly a nest egg can grow. If you want to catch up and you’re still working, contribute as much to your 401(k) as you possibly can.

#2. Be Debt Free

It doesn’t matter if it’s credit cards, a vehicle, or a private loan, debt can be crippling at any age, and especially tough in retirement. As you approach retirement, make an aggressive effort to pay off any debt and to avoid taking on any new debt.

According to a recent study, 42 percent of Americans age 56 to 61 have debt, with an average amount of $17,623. If you take out the seniors who only have mortgage debt, the average load still sits at almost $12,500, with about $5,000 of that being credit card debt.

In a time when you’re going to be making less money than you did in your working years, debt can be a tremendous burden. Do everything you can to make sure it won’t be holding you down.

#3: Choose A Strategy For Your Mortgage

A home mortgage is indeed a debt, and while we just recommended paying off all debts, there are two different schools of thought when it comes to having a mortgage in retirement. The first is that you should make it a priority to pay off your mortgage before you retire. If you’re within about 10 years of retirement age, this is probably the strategy you want to use.

But if you’re a little farther away from retirement, you might want to consider paying off your mortgage as scheduled and investing any extra funds or use the money to pay off debt. Your potential earnings will likely be more than the interest paid on your home loan if you invest, and as discussed in the previous tip, it’s a smart move to get rid of debt before you are living on retirement income. A mortgage provides a tax benefit through the interest deduction, which is something that can be useful in your working years.

If you’re considering a reverse mortgage, be sure to read our reverse mortgage guide as you start your research.

#4. Create A Spending Plan

Budgeting is a crucial step toward financial peace at any age, but it is even more important in retirement. Experts have a few tips for building that retirement budget:

Plan on spending about 4 percent of your retirement savings every year, which should make your savings last about 25 years.

Instead of planning a budget based on a single month, take a look at your last 12 months of expenses combined to get a realistic idea of what you’ll be spending.

Budget for the “big three” separately. The US Department of Labor recommends that in retirement, you should spend no more than 34 percent of your money on housing (including utilities, maintenance and insurance), 16 percent on transportation, and 14 percent on healthcare. Estimate what you will be receiving in retirement and make sure what you’ll be spending lines up with these numbers.

#5. Consider Retiring Gradually

The notion of retirement can be alluring, but many people end up with a sort of buyer’s remorse when they retire and see that they can barely afford to live. Therefore, more and more Americans are choosing to retire gradually. Here are some of the top ways to retire gradually.

Be a valuable employee Companies invest a lot of time, money and resources into finding good employees so most want to keep quality staffers for as long as possible. Become one of those key employees.

Find a part-time need for your skills If your company doesn’t have a need to keep you on full time, try to find a reason they can use you part time. For example, if you’ve been a sales manager for 30 years at your company, you’ve gained a lot of knowledge about sales operations specific to that company. Inquire about taking on a sales onboarding role to help onboard new hires.

Make a financial case Hiring and training a new employee takes time and money. If you want to retire gradually, you have a good financial case to present to your company. If your job can be done remotely or even part-time, that just adds to your case.

#6. Don’t Expect Social Security To Cover It All

According to the AARP, almost a quarter of Americans plan for Social Security to be 90 percent of their retirement income. With the average Social Security payment is right at $1,400 a month, it is not hard to see why so many senior citizens struggle. If you are looking toward retirement with a plan of relying on Social Security, you may need to reassess. Decide now to fund a 401(k) or IRA. As stated earlier, it’s never too late to start saving. Also, you can delay taking your Social Security payments. By pushing receipt of Social Security to age 70, you will receive 130 percent of the benefit amount you would have at standard retirement age.

The Bottom Line: Get Started

Preparing for retirement can be overwhelming, and the numbers may be scary. However, with just a little planning, you can make a significant impact on your financial stability going into retirement. Start now, eliminate debt, and push your retirement age if necessary to be comfortable in your senior years of life.

People can choose to define financial independence in their own way — after all, not everyone wants a private jet and a mansion. However reaching real financial independence — the ability to live comfortably off one’s savings and investments with no debt whatsoever — could be easier than you think.

It takes a plan. Many individuals — particularly those with a healthy self-discipline and solid financial guidance — can reach this goal. Here are 10 ideas to get started.

  1. Visualize first, then plan. Anyone’s vision of financial independence can probably use a reality check. Start by considering what your vision actually looks like and then gather some qualified financial advice to set — or reset — your course. The path to financial independence may be considerably different at age 20 than it is at age 50; the more time you have to save and invest generally produces a better outcome. But whatever age you are, start by getting a realistic picture of what options you have.
  2. Budget. Tracking your finances effectively starts with budgeting – the process of measuring income, subtracting expenses and deciding how to divert the difference to your goals. It’s the essential first task in achieving financial independence.
  3. Spend less than you earn. Most of us have certainly heard this rule, but it remains one of the toughest financial behaviors to execute. One rule of thumb is to put between 10-15 percent of your gross income in savings or investments every week (which includes employer match if it’s available). Working couples might try to bank a substantial part of one salary if possible. In any case, adhering to a lower standard of living and expenses will help anyone put more money into savings and investments sooner.
  4. Build smarter safety nets. Emergency funds and insurance are part of the financial planning picture, but they’re rarely discussed in combination. The traditional definition of an emergency fund is a separate account for cash that can be used instead of credit in a sudden emergency like an unexpected car or appliance repair. But it might be wise to evaluate current deductibles on home, car and health insurance to see if those amounts should be built into one’s emergency fund – many people keep deductibles fairly high to keep premiums low. Would you have cash on hand to cover deductibles if you had a sudden claim? If not, put that money in reserve. The more effective you are at dealing with financial emergencies, the faster your savings and investments can grow.
  5. Eliminate debt. Though consumer debt levels have generally fallen since the 2008 financial crisis, the Federal Reserve Bank of New York reported in February that home, student loan, auto and credit card debt began creeping up again in 2014. Getting rid of revolving, non-housing debt is one of the most effective things you can do to free up money to save and invest.
  6. Consider your career. Financial independence doesn’t require you to quit a career you love, but you really can’t get to financial independence without steady income to fuel savings and investments that will build over time. If you are behind on your financial goals, chances are you won’t be able to quit working, at least for a while. You might even consider expanding your sources of work-related income, such as consulting part time. Consider speaking with qualified financial and tax experts as you evaluate your current career income and benefits picture. Also keep in mind that over the age of 50, the Internal Revenue Service allows you to make catch-up contributions to both 401(k) and IRA accounts.
  7. Downsize. Whether you are age 20 or 50, financial independence requires a personal evaluation of what money, property and items you will need to live happily and securely. It might also help to stop any “Keeping up with the Joneses” you’ve done in the past that’s unduly influenced your spending. Generally, you’ll get to your goal faster if you can cut your overall living expenses. For some, that means selling your home and moving to a smaller one or to an area with lower living costs and taxes. You can also sell or donate property you don’t need and use those proceeds to extinguish debt or add to savings or investments.
  8. Invest frugally. Become a student of investment fees and commissions. When you’re able to add money to savings or investments, watch for fees, deadlines or penalty rules. Washington took aim earlier this year on fees on 401(k) accounts, but make a full evaluation of what fees you are paying on every investment account you have. And if you work with a qualified professional licensed to sell investment products, know how much you’re paying in investment and advisory fees for their services and discuss their performance.
  9. Buy assets that generate income. No investment is foolproof – whether you invest in stocks, real estate, collectibles or cash investments, all have up and down markets. It is important to fully understand everything you invest in and focus on assets that will make money over the long haul. Reading widely on the subject of any class of investment you’re interested in will help you buy low so you can sell higher at a later date. Don’t forget to study the tax ramifications of any investment transaction you make.
  10. Always know where you are financially. Financial planning isn’t about making one set of financial decisions and assuming you’re set. Lives and situations change and your financial planning must be flexible enough to withstand both positive and negative changes without derailing your hopes for financial independence. If your forte is not investing, financial planning or tax matters, by all means bring in qualified experts to help. But financially independent people generally have their money issues at their fingertips not only for their own use, but for estate purposes as well.

One last point. Being able to pay for a lifestyle you love without worrying about money is an enormous relief and reward. If you don’t feel you’re heading in that direction, consider putting some of these steps in motion today.

Bottom line: Not everyone inherits a fortune. Financial independence takes work and discipline, but small steps can yield big rewards over time.

How to be financially stable

What Business Decisions Could Be Made Using the Balance Sheet?

Financial stability in business terminology refers to making enough money from your operations to pay for your regular business expenses and feeling that the long-term financial success of your business is secure. Having financial stability is important since it ensures you can continue to pay your business expenses and handle potential downturns in the market as well as take advantage of opportunities to expand.

You can take a look at your business’s financial statements to determine your current financial position and then take actions to improve financial stability.

TL;DR (Too Long; Didn’t Read)

The financial stability of a company refers to its ability to generate healthy profits, avoid heavily increasing expenses and have a better chance of long-term success.

Business Definition of Financial Stability

The definition of financial stability in business goes beyond just making good money through sales. It indicates that your business continues to grow more profitable while your expenses stay mostly the same or see little increase.

A financially stable business will not rely too heavily on debt, will use its assets efficiently and will have a healthy profit margin on its sales. Such a business will usually have an emergency fund on which to rely in times of difficulty so that there’s less of a risk of having to shut down based on economic factors. In addition, the business has a healthy number of repeat customers that helps bring in steady revenue and allows for lower customer acquisition costs.

Importance of Financial Stability

While you’ll always want your business to be financially stable, it especially comes in handy when the economy or market conditions deteriorate. If sales were to slow down in a recession, you should be able to tap into the emergency fund to pay your bills until sales can improve.

Financial stability is also important since it provides opportunities for business expansion and growth. When your company continually sees increasing profitability, you can afford to add to your product line or even open up an additional shop in a desirable location.

Financial stability is also important to lenders, business partners and investors. If your company ever needs to borrow money through a small business loan, for example, lenders usually want to see a statement of financial stability that shows that your business has sufficient cash flow and isn’t heavily indebted already. General investors and business partners will also want to see proof of financial stability to decide whether it’s a good move to work with you or put money into your business.

Assessing Financial Stability in Business

To get an idea of your company’s financial stability, it helps to take a look at a few key financial statements, starting with your profit and loss statements. Looking at quarterly or year-to-date profit and loss statements for several periods or the last few years will give you a picture of how your operating revenues and expenses have changed over time. This can show you whether you’re becoming more profitable while not having a large increase in expenses.

You can use your past income statements to determine your profit margin and changes in net income to verify increasing profitability and growth. Your balance sheet will give you a clear picture of your liabilities and assets so that you can verify your emergency cash funds and determine whether you should pay down some of your debts.

You can also gather information from your financial statements to calculate some key ratios that indicate your business’s efficiency, profitability and reliance on debt. For example, your debt to total assets ratio — your total liabilities divided by total assets — shows you how leveraged your company is. Your net profit margin — your net income divided by total revenue — helps you assess profitability after expenses.

Improving Financial Stability

When your small business is new, it will usually take time to achieve financial stability. A few key steps you can take to help with the process include paying close attention to your expenses and focusing on building relationships with customers to generate more recurring revenue. It is much cheaper to keep old customers than it is to acquire new ones.

When considering growth opportunities or making nonessential purchases, first ensure that your company has a healthy emergency fund so that you don’t risk immediate business failure if something goes wrong.

Johnny Gunawan, from the Hartanah Group, shares how to be financially stable during pandemic and chaos.

by How to be financially stableLewis Schenk Contributor.

How to be financially stable

Since the early months of 2020, Covid-19 has had devastating effects on communities. In the wake of its most intense period of infection, the economy as a whole has degraded, leaving individuals and households with vast financial issues, with particular regard to investment. It can be difficult to analyse the financial market in crises, however, Hartanah Group offers a number of strategies to assist in the wealth creation process. Johny Gunawan , CEO of the group, explains these strategies, including the Cooperative, Business Education, and Equity Crowdfunding schemes, in addition to a three-point strategy to maintain wealth amidst chaos.

Transparency is vital in times of crisis, with Hartanah Group embodying this quality in both the public and private spheres. The group’s Public Auditor Report is published every three months, and the company remains the only one of its kind to consistently pay back clients on time and in monetary entirety. Equally, goal driven behaviour with regard to handling money is paramount to stability and aiming for specific expenditure and income can help to stay on track, even during the pandemic. Gunawan is goal driven himself in both his own wealth creation and in the support of small businesses via crowdfunding so that business owners may raise capital without a loan.

The most essential tips Hartanah offers are a three-point advice strategy.

Firstly, the building of a security fund can help substantially. Having at least 6-9 months of expenses as a security fund decreases financial stress. When good investments are applied this fund can capture opportunities in the chaos. Even in the event of a stock market crash a security fund can assist with mortgage payments that may have otherwise been unpayable.

Additionally, cash and cashflow are helpful in chaos. As money cannot ‘disappear’ and only be transferred, it is important to be in the wealth creation segment of the cycle. Cashflow can be easily explained in an equation; cashflow = income – expenses. The objective should be to increase cashflow, which occurs when income increases, leaving expenses unchanged. To maintain cashflow in the event of a decreased income due to crisis, expenses should be decreased accordingly. A priority check is emphasised by Gunawan and the Group so that unnecessary expenses can be cut in this event, such as the gym membership that isn’t used nearly enough or the money spent on socialising (which, in accumulation, can become very costly).

Having multiple streams of income is also extremely useful in the event of crises, specifically Covid-19, with part time workers doubling in unemployment in the early months of the pandemic. When finding a second job, or ‘side hustle’, diversity is key and it is wise to venture out of the industry of one’s main occupation as some industries can be gravely affected by chaos. With a second stream of income from a job in a separate field, it vastly decreases the risk of losing income altogether, therefore providing financial security and stability. Diversity in stocks is also emphasised by Hartanah Group. Gunawan explains his personal approach to this, stating “I go heavy on cash generating portfolio that is not so pegged to the economy. For example, I use Forex”. To protect his capital, he uses a hedging strategy and to preserve time he engages a Proprietary trading company to trade on his behalf.

Hartanah Group, as a whole, is focussed on the betterment of individuals’ and families’ financial survival in these challenging times and stresses the important financial advice explained by Gunawan.

Johny Gunawan is an established entrepreneur and Wealth Management Coach from the Hartanah Group . His insights and education has helped hundreds of budding entrepreneurs and small business owners to take control over their financial situation and gain the flexibility and freedom they’ve been seeking.