There's no magic bullet to guarantee financial stability, but these common-sense steps can help.
If you’re seeking financial stability and you’re asking yourself what you can do, keep in mind that good intentions aren’t enough. To achieve the financial stability needed as an individual or to support a family, it’s important to take a few basic steps:
1Learn basic financial concepts
It’s important to have a grip on essential financial vocabulary. This way, you’ll have a better understanding of the economic information that you receive through the media, and you’ll also understand better what your current situation is and what your goals are.
For example, you need to know what the different kinds of interest are, what a mortgage is, the terms and conditions of any loans you may have, what your credit rating is, how a rental contract works in your country, what it means to be financially autonomous, what inflation is and how it affects you, what the GDP is, how insurance works, and so forth.
Also, make sure your children come to understand these concepts as they grow up.
2Evaluate your current financial situation
In order to know what your financial situation really is, you need to analyze what your income is, when it comes in, what inheritance or investments you have (if any), what taxes you need to pay, what expenses you have incurred up until now, etc.
Go over your bank statements to put real numbers to your current situation. This way, you can take action, such as setting rules for how much you can spend. You will also be able to detect places where money is being wasted and where you can make cuts.
3Get your spending under control
How do you use your money? Do you use your credit card impulsively, and then end up being shocked when you see how much you owe? Visualize your regular general expenses, such as your rent or mortgage and utilities. Also go over your variable expenses, such as your cell phone package, trips, food, social events, subscriptions, entertainment, and clothes, as well as education expenses for your children and your house maintenance costs.
If you’re spending too much money on something, take action before any more time passes. Talk to your service provider, go back over your contract, figure out which social events you can dispense with, and make any necessary changes to your habits.
4Prepare for retirement
Learn about retirement funds and pensions according to the laws of your country. This will help you determine if you need to take any steps to improve your retirement planning before the moment comes. Evaluate the possibility of investing in a private pension plan, for example.
5Find someone to be your advisor
The chances are that among your family or friends there are people you can consult on financial matters. If they aren’t familiar with the issue, they can refer you to an expert. It’s important in this area to consult people you can trust.
6Make an annual budget
Write down on paper or in a spreadsheet what your income and expenses are projected to be in the coming year. This will help you visualize your financial panorama and take action to avoid or remedy financial problems.
Now is the time to change service providers or plans, to look for extra sources of income, and to program expenses, postponing them if necessary.
7Stay away from “easy” solutions
When you find yourself in a tight or vulnerable financial situation, quick solutions may appear attractive, such as a loan or an investment that promises to give immediate returns. Be careful with these traps! Examine the conditions of what is being offered to you before you get involved. Take into account the fact that promises of easy money are rarely true. If it looks too good to be true, it probably is. Don’t allow yourself to end up being a victim.
Even if the seemingly “easy solution” isn’t a scam, it can have hidden consequences. For example, a loan that makes things easier for you today can become a terrible burden when you have to pay it back, because the interest you need to pay may end up being enormous.
Nor should you fall into the deception of turning to gambling as a solution. Gambling, especially when you’re in financial difficulty, is much more likely to ruin you than it is to solve your problems.
8Savings are great ally
We live in an economic system that invites us to spend constantly. However, as an individual and as a family, you have to think first about what will be best in our present and future financial situation.
If you’re living from paycheck to paycheck, you won’t be able to face situations that inevitably will arise sooner or later, such as medical emergencies, car accidents or mechanical problems, urgent home maintenance, or an increase in taxes.
The unexpected has to be an item on your list of expected expenses. In short, you need to have a “cushion” of savings to fall back on. That metaphor is a good one, because having savings will help you sleep better at night.
We live in a complex world where it can be very difficult to be responsible stewards of the gifts God has given us. However, by taking these common-sense measures, we have a better chance of conserving and growing our gifts in such a way that we can not only sustain our own basic needs, but also help others who are less fortunate.