What does it mean to be financially stable? Financial stability means different things to different people. It’s subjective and personal. For some, it means holding down a good job and supporting oneself. Others define it as maintaining a debt-free lifestyle while consistently saving and investing.
In general, financial stability means being able to cover expenses and still have money remaining. It offers peace of mind without the constant struggle to make ends meet.
Does financial stability matter?
Only you can answer this question. Financial stability provides freedom, peace, and future opportunity. It can ensure:
- Improved overall financial health
- Improved overall mental health and quality of life
- Access to varying loans (mortgage, personal, business, etc.)
- Greater negotiating power
While all that might sound nice, some prefer a YOLO (that is, you only live once) kind of approach to life. They will push their financial limits as far as they are able. We are all on different journeys. How you choose to live your life is your choice alone, provided you don’t burden others with your decisions.
If you seek financial stability, however, you will find there are many ways to achieve this peace of mind.
Here are 15 signs you are on the way to being financially stable.
1. You have multiple bank accounts.
Along with a standard checking account, you also have separate savings accounts. Additional savings accounts help you organize your budget for specific goals or other major expenses. Adding a High-Yield Savings Account into the mix can help you achieve your savings goals even faster.
2. You can handle a financial emergency.
An emergency fund offsets unforeseen expenses. This is a savings account that is separate from other long-term savings goals. It helps cover the costs of job loss, illness, unexpected home repairs, and more. It is recommended to have at least 3-6 months’ worth of expenses saved for you and your family.
3. You don’t overdraw from your checking account.
Managing your money begins with knowing how much comes in and goes out. You are not surprised by outstanding checks or bill payments.
4. You are never late on your payments.
Your bills are all paid by their due dates. Whether you pay them ahead of time or schedule payments, you are confident that you have the funds to cover the cost. On-time payments are crucial to maintaining a good credit score and clean credit history.
5. You can accommodate and enjoy spending money on special occasions.
Special occasions should be just that – special. They are unique rather than everyday moments that can be financially acknowledged or celebrated without worry. If an occasion calls for it, you are capable of splurging without negatively impacting your financial health.
6. You use credit cards wisely.
Credit cards are used effectively to build credit history and maximize credit card rewards. Unless you have a 0% interest rate, you completely pay off your credit card balance each month to avoid interest payments.
7. You consider your purchases.
Reckless spending doesn’t appeal to you. You tend to think about the kind of purchases you are making, especially the larger ones. Those with financial stability usually avoid spending money on purchases they later regret.
8. You and your partner/family are on the same page.
When you become a partner or a parent, it’s important to ensure a level of financial transparency and understanding. Finances are the building blocks to your and your families’ future. Your financial decisions affect them as they do you. Discussing money matters in an open and honest way reduces the likelihood of financial infidelity and helps you feel more like a team.
9. You can separate your finances from your emotions.
Your financial situation is based on numbers. Provided you don’t cook the books, your numbers are based on facts. Financial stability means that you make financial decisions in accordance with facts rather than allowing your emotions to get the best of you.
10. You don’t lose sleep over finances.
Stress can keep your mind distracted. If bills are keeping you up at night, you aren’t in a financially stable position. Without this kind of stress, you gain peace of mind and can enjoy a better night’s sleep.
11. You are an intentional saver.
When your paycheck comes in, you choose not to spend every dime you earn. Putting money away for a rainy day is an intentional habit.
12. Your estate planning is in order.
Some folks are A-OK without having any estate planning in place. Provided you have certain specifications and/or a family, you might prefer your estate planning to be documented in the event of your death.
13. You invest in yourself.
Investing in yourself builds transferable skills beyond the workplace. It can increase your income potential, strengthen your self-confidence, and offset expenses. When you take the time to learn new skills, you create more opportunity for yourself.
14. You increase your net worth each year.
Your net worth typically increases as your financial situation improves over time. While some factors that impact your net worth are not in your control, there are many actions that encourage growth:
- Diversifying your investments
- Consistent savings and retirement contributions
- Building additional streams of income
- Earning compound interest
- Limiting your debt-to-income ratio
If you’ve taken the time to invest in yourself, you are likely familiar with the ways to maintain and increase your net worth every year. This is especially true if you’ve researched and learned about different personal finance and investment strategies.
15. You can start over if you need to.
When you’re financially stable, starting over doesn’t necessarily feel like a death sentence. You can pick yourself up, pick a direction, and just go. The skills you’ve learned, combined with the knowledge you’ve accumulated and the safety net of your financial standing, propel you forward as you navigate your next chapter.
You’re in Control
What do you think about financial stability? If it’s something you’re interested in, hopefully some of the signs listed above offer a little insight into the ways you can work toward it. If you lean towards more of the YOLO way of life, then more power to you. Personally, Brian and I have learned to enjoy both; through balance and intention, we’ve worked to create a financially stable way of life to explore YOLO moments. For us, it is all about the balance.
Take control of where you want to be and what you want to do. Try not to let your finances control you. Financial stability is a journey in and of itself. With many ways of striving for it, you will undoubtedly discover things that work for you and things that don’t.
What are other signs do you believe indicate financial stability?
Excellent summation of personal financial management. Dave Ramsey would be proud. This should be required reading for all congressional candidates.
Oh, I wholeheartedly agree. Thank you!