Financial Stability Is the Key to Life Success
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What does success mean to you? Obviously, that response differs from one individual to the next. Some could suggest that creating your own company, having a family, or having the freedom to travel the globe are examples of this. All of these are admirable responses, but they are all impractical if you aren't financially secure.
This is a word that you may have heard before. But what does it really mean?
"Being financially sound" is defined by Sabrina from Finance Over 50 as "consistently making good financial decisions that increase your net worth and being able to maintain this state for the foreseeable future."
More precisely, in the area of finance, "financially sound" refers to being financially healthy and capable of making solid financial judgments. Stability, security, and growth are also characteristics of financially prudent persons or actions.
Putting money aside for emergencies, for example, is always a wise financial option. The first argument is that by safeguarding your possessions, you are improving your financial security. Second, by planning for crises, you're bolstering your financial stability. You're also getting closer to your financial objectives by having money set aside.
Financed autos, on the other hand, add monthly payments to your cash flow, reducing it. Furthermore, if you owe someone money, your financial stability will be jeopardized. Last but not least, you're paying interest on a depreciating asset, which is the polar opposite of progress. The 2015 BMW 7 Series, for example, had a five-year average depreciation of 72.6 percent by 2021.
Building an emergency fund, on the other hand, is a sensible financial decision; purchasing a new car, not so much.
The advantages of financial stability
Why is it so important to be financially stable? Because having a healthy financial situation will affect all element of your life. In reality, if you make solid financial choices on a regular basis, life gets simpler and more fun. Here are some of the ways that being financially secure might benefit you in your life.
Mental health has improved
It's no surprise that a person's mental health and financial situation are inextricably linked. In fact, in England alone, approximately 1.5 million individuals suffer from both serious debt and mental health issues.
Furthermore, according to a Money and Mental Health study, 86 percent of respondents with mental health issues said their financial position made them feel worse.
If these mental health issues are not treated, the following symptoms may occur:
- An abnormally high level of anxiety or terror
- A deep sense of grief or a bad mood
- Concentration or learning difficulties
- Mood swings
- Sleep or eating patterns that have changed
- Abuse of drugs and alcohol
- Withdrawal from social situations
- Suicidal ideation
Physical wellness is improved
"72 percent of Americans reported feeling stressed about money at least some of the time," according to the American Psychological Association in 2015. In 2021, a CreditWise poll revealed similar figures, with 73 percent of Americans seeing their money as the most stressful aspect of their lives.
What makes this so alarming? What does it have to do with physical health, exactly?
Chronic stress is not just unpleasant; it may also be fatal. Stress has been dubbed "the silent killer" by several specialists.
Headaches, gastric trouble, exhaustion, and a weakened immune system are some of the short-term impacts of stress. The long-term consequences, however, are the most troubling.
Stress increases the risk of heart disease, stroke, depression, and obesity. As a result of the many health problems caused by excessive stress, being financially secure may help to ease some of that tension. Even if it doesn't totally eliminate all of your worries, you'll be able to deal with any health-related concerns.
Relationships that are stronger
Finances are often cited as a source of marital strife. This might, of course, be scored higher or lower based on the specific research. Regardless, there's no doubting that finances may strain relationships.
"Financial stress is bad for anyone," Ashley LeBaron, a doctoral student in the University of Arizona Norton School of Family and Consumer Sciences in the College of Agriculture and Life Sciences, says. "But for lower-income couples, it can really affect the time, energy, and focus they can put on relationships."
It all makes sense when you think about it. You may become participants in the blame game if you are unable to pay a bill or go out on a date night. As a consequence, you may turn against one another rather than finding methods to work together to improve your financial situation.
More opportunity for personal and professional growth
When you handle your money wisely and prepare for the future, you have greater control over your life. Those who are constantly saddled with big debts, on the other hand, are subject to lender laws. They also lack the flexibility to pursue their personal and professional ambitions.
For instance, if you aren't financially stable, you won't be able to take that dream trip, change careers, or build your small company. It's also possible that you won't be able to attend networking events or pay for your child's school.
Overall, if you want more freedom and opportunity in your life, you must be willing to accept modest sacrifices for the larger benefit.
Possibility of giving back
Another advantage of being financially stable? You have the opportunity to help others. And, as crucial as this might be, it's vital to remember that.
- Reduce your blood pressure.
- Boost your self-esteem
- Anxiety, despair, and stress may all be reduced.
- Boost your happiness
- Develop personal and professional relationships.
In a prior Due post, Eric Rosenberg says, "With the right financial discipline, you can turn around financial struggles and get your donations underway." "However, before giving money to others, make sure you pay off your high-interest debt."
Children who are better off financially
While most parents aren't thinking about it, if you're financially secure, your children will be as well. As a consequence, they'll know how to evaluate money, establish realistic objectives, and make sound financial judgments.
They'll also know how to develop new money-making chances. They'll also be able to give back to their community since they're in such good financial shape.
Your financial future has been determined.
"You just feel better when your finances are in order," Peter Daisyme explains. "You also have a better understanding of how to save and plan for the future." Plus, you'll sleep better at night knowing you have a clear picture of your finances."
Specifically, after you've secured your financial future, you'll be able to enjoy your senior years. Why? Because you can spend your retirement whatever you choose, whether it's pampering your grandchildren or taking a Viking cruise.
You'll also be able to cover any prospective health-related expenses, such as long-term care. You'll also be able to leave your heirs a legacy, such as an inheritance or life insurance death benefits.
How to improve your financial situation
So, yes, it's true. Being financially stable is essential for success in life. But how are you going to do it?
To begin with, you must have an open mind and be prepared to make sacrifices. Throughout your trip, keep the following suggestions in mind.
Begin right now, not later
The earlier you begin to save, the better. For a variety of reasons, this must be true for younger generations. For starters, you'll have more time to ride out market swings. Second, rather than spending your money recklessly before you have severe financial commitments, such as a mortgage, you should create a savings reserve before you have major financial obligations, such as a mortgage.
However, regardless of your age, you should make growing your yearly savings a priority. Even if it's just a tiny amount, having a financial safety net is preferable than having none at all.
Keep your spending to a minimum
Tracking your expenditures and making a budget might help you stay within your budget. The 50/30/20 guideline, for example, advises you to split your after-tax take-home pay into the following categories:
- The fundamentals (50 percent )
- Desires (30 percent )
- Cost-cutting (20 percent )
This will also assist you in eliminating unnecessary expenditure and automating your savings. If you discover that your spending exceed your earnings, you may need to locate another source of income until you can get your finances under control.
Invest in an emergency fund
Inadequate emergency finances might result in significant debt liabilities. When you're already coping with a crisis, adding a financial weight, such as an added stress burden, makes things worse.
A three-to-six-month emergency fund is recommended by most financial experts. If your principal source of income changes, as freelancers and contractors do, it's a prudent and financially sound move to save eight to twelve months' worth of costs.
A $1,000 savings account, on the other hand, may make a huge impact.
Reduce your debt
Do you owe money on your credit cards or have student loans? First, identify the debt with the greatest interest rate, and then devise a strategy for paying it off in a reasonable length of time.
Above all, strive to stay away from unneeded debt in the future. If you don't have enough money to pay off a credit card amount when you get your bill, for example, put off making this purchase until you do.
Put money aside for retirement
What are your plans for retirement? If you don't plan on working every day for the rest of your life, setting a retirement goal is essential. While most people don't consider retirement while they're young, it's never a terrible idea to do so - particularly if your employer provides a 401k account.
In most cases, your employer will match a portion of your retirement contributions. As a result, make every effort to maximize your employer's contribution. After you've maxed out these contributions, look into annuities as a way to augment your retirement income.
Make sure you have enough insurance
Insurance isn't the most thrilling method to invest your hard-earned cash. Having insurance, on the other hand, is a tiny fee to pay for peace of mind in the event that anything tragic occurs.
A life insurance policy, for example, will give financial stability to your loved ones if you die unexpectedly. Even if you find the matter tough to broach, it's a certain method to keep your family out of financial trouble.
Enhance your financial knowledge
You don't have to be a financial whiz to succeed. However, you should at the very least enhance your financial literacy so that you grasp the fundamentals of saving, spending, and investing. If you have children, you should also teach them this information.
Thanks to John Rampton at Business 2 Community whose reporting provided the original basis for this story.