People often assume that the key to a strong financial future is making more money. This isn’t even close to being true. In fact, people who make massive seven-figure incomes are often less stable than those making meager five-figure incomes. It’s all in how you use and save the money you earn.
Here’s How You Can Build a Stable Financial Future
If you want to build a stable financial future for your family, then you’re making the conscious decision to get on top of your finances and carefully scrutinize your lifestyle. While you’ll have to make some tough decisions and sacrifice a few things, you’ll enjoy a much happier life down the road.
Here are a few steps you’ll need to take:
Establish a Budget
Everything starts with a budget. If you don’t know where every penny is going, then you certainly don’t have a stable financial situation. The very first thing you need to do is create a spreadsheet and start tracking your income and expenses. Here’s a really good guide on how to get started with budgeting.
Once you identify your income and expenses, you’ll notice that you’re either spending more than you have, or that you have a surplus at the end of the month. If your spending exceeds your earnings, then you’ll need to minimize some of your fixed expenses. Otherwise it’s time to develop a plan for saving some of that money.
“A good idea is to save around 10% to 15% of your salary,” blogger Vladimir Zivanovic explains. “If you are in a situation where your income drastically exceeds your expenses, you can afford to save up to 30% of your salary; and make sure that you do. You should always have an emergency fund because of the volatility of the market, which may lead you to losing your job at any point.”
Continue Learning New Skills
If you study the industry you’re working in, you’ll notice that technology and trends are quickly evolving. So, it stands to reason that you should be learning new skills, too.
“Learning new skills can allow you to change positions or even departments,” says Will Robins, Executive Managing Editor at Feedster. “Someone working at a content production company as a writer might take some classes on graphic design. An employee that can produce written content as well as infographics is far more valuable than a person who can just do one of these things.”
Never Settle for Average
The last point leads into this one: Don’t get complacent and settle for average in your career. If you’re constantly improving your skillset, then upward mobility is possible. Just because you’ve been in the same mid-level job position for the last five years doesn’t mean this is what you’re destined to do forever. Apply for new jobs, seek out new income streams, and continually search for smart opportunities to make more money.
Hire an Accountant
A lot of people do their own taxes using a service like TurboTax, simply because it’s cheaper. However, if you don’t have any professional experiencing filing taxes, then you probably aren’t saving much money. Hire an accountant instead.
While an accountant may cost a couple hundred dollars, they almost always save you more in deductions (and peace of mind). All financially-smart families use an accountant, and so should you.
Make Some Diverse Investments
You need to be making investments. In case you haven’t noticed, the money you’re stashing away in a savings account is only making a few dollars per year. That’s not good! But I don’t want to risk losing my savings with volatile investments, you may say. Well, that’s all fine and dandy, but who said you have to invest all of your money in a single place?
The key to successful investing is diversification. This means putting money in different stocks, bonds, mutual funds, and maybe even some real estate and precious metals. With diversification, you’re able to hedge your risk and ensure your money grows at a high and steady rate.
Stop Renting and Start Buying
Are you renting a house or an apartment? While there are some benefits to renting, financial stability is not one of them. You need to stop renting and start buying as soon as possible.
When you rent, you’re essentially throwing money down the drain. You’ll never get a cent of that money back. However, when you buy, you’ll build equity over time. Eventually, you’ll own the house free and clear. This gives you something to sell or pass along to your children. It will also one day eliminate your single biggest monthly expense.
Just Be Smart
The best piece of advice is to just be smart. Deep down inside, you know when you’re about to make a dumb financial decision. Do you really need to buy a boat? Is it smart to pay a $2,000 mortgage when you’re only bringing in $4,500 per month? Can you afford another dog? Be smart about your choices and you’ll do much better.
Take Things One Step at a Time
When you take a bird’s eye view of your financial future, it’s easy to get overwhelmed. The key is to take things slowly and only approach one issue at a time. Start with a budget and then progress from there.
As you make each new decision, pieces will begin to fall into place, and you’ll feel a wave of confidence come over you. Don’t wait any longer – start today!