What does it mean to be financially stable? A question you’ve probably asked yourself before or are even contemplating about right now. But because personal finances are very unique to you, how you view financial stability may vary to the next person. However, there are some common grounds to the definition and how you can get there. Below I wanted to explore some simple steps that can help guide you to some financial security.

What is Financial Stability?

Like I mentioned in the intro, financial stability can take on many variations or mean something slightly different from someone else. However, getting to the core of this term is fairly easy. In the simplest way possible, being financially stable means you are spending less than you earn ( or living below your means). You are able to pay for the basics of living (food, shelter, utilities) and still have money set aside for any unexpected bills, emergencies, and your future retirement. Yet, I think a big part of achieving financial stability is that you are not stressed about money. You know you’ve reached financial peace when you aren’t worried about an unexpected cost or panicking over how you’ll pay your rent, mortgage, or any accrued debt.

How I look at Financial Stability

Universally to me, the above is the essence of the definition. But there are certainly variations as your goals and personal life evolves. In my early days of looking for financial stability, that above definition was my core goal. But as my finances improved and my salary income grew, my versions of financial stability altered into things like:
  • Being able to cover a year or more of expenses if I lost my job
  • To start doing more than protect covering the basics. Like buying something for ourselves
  • Getting 100% debt free
  • And going on vacation and not worrying if we can afford to take one

Some Signs You Might Be Financially Unstable

Although I covered the definition and a bit about what it means to be in a good financial place, I want to share some warning signs that your finances might be a bit unstable. Sometimes you may not realize you are on the verge of instability or you might be in some form of denial. Back in 2013-2014, I knew I wasn’t financially in the best shape but chose to pretend it wasn’t bad. But until I really reflected and wrote down what was happening, I didn’t realize how bad my money mistakes were. Here are the signs of unstable finances:
  • Very low emergency fund or you have none at all
  • Maxed out one more credit cards and barely making minimum payments
  • Your credit score is extremely low or the scoring has been sinking
  • If you lost your job, you’d be financially screwed immediately
  • You are not saving for retirement because you can’t afford to, know how to
  • After your monthly expenses you have nothing leftover
  • Late fees or overdraft fees happen quite regularly
  • Money is constantly stressing you out and losing sleep over it
  • You end up borrowing money from family or friends more than you want to admit
  • You’re drowning in total debt because you’re making bare minimum payments, trying to consolidate, or trying to push it off.
These are just some of the handful of warning signs. And five of the above, I dealt with for a few years after college. Maybe you fit into only a few of the signs above or maybe them all. The important step here is not to feel ashamed or feel that you are alone — as so many people of different generations are battling these too. But the great news is you are learning and reading this post, looking to make changes with your finances. In the next section, I’ll cover how you can become financially stable. These are the steps I took in order to reach a new level of financial health.

How to Become Financially Stable

Generally, when searching for answers about personal finances I think many people are hoping for magic formulas. Or just looking for some sort of secret process that has never been shared before. If that is your thinking, I need to tell you that there is no secret formula! Don’t worry, in my early days of researching I was hoping to find that too. But in reality, the steps to becoming financially stable are really straightforward.

Start Living Below Your Means

A big problem I think many of us face is that we live above our means. We fund a lifestyle that we clearly cannot afford for whatever reason that may be. If you want to get financially stable, you gotta start living below your means — spending less than you earn. Steps to help you live below your means include:
  • Create budget – make a list of all your monthly expenses, your total monthly income, and put a spending plan in place to correct your challenges. Try not to get hung up on budgeting too much, but in the early stages you should create one.
  • Lower your high costing bills – Living, food, transportation, and utility bills. This may mean downsizing your home, car, and being more money conscious on your food habits for awhile. But get these under control.
  • Start prioritizing your savings – Practicing paying yourself first and build that buffer for emergencies and other “life happenings.” You can set up automatic transfers once you know how much you can save, so you never see that money. I like CIT Bank’s Savings Builder that has solid interest on your cash.
  • Use personal finance software to help you – If spreadsheets aren’t enough, look into some tools to help you like You Need A Budget, Mint, or Personal Capital to keep you on track.

Put Together A Debt Payoff Plan

According to debt.org, here are some of the average debt by age groups:
  • Under 35: $67,400
  • 35–44: $133,100
  • 45–54: $134,600
  • 55–64: $108,300
  • 65–74: $66,000
  • 75 and up: $34,500
It’s a growing problem in the United States, between student loan and consumer debt. After budgeting and starting to save, you want to put together a debt payoff plan. Getting financially stable means eliminating your bad debt and as fast as possible. This includes:
  • Credit Card Debt
  • Student Loan Debt
  • Car Loan Debt
Two debt pay options you might want to consider are paying off the debt with the highest interest first, or paying down debt of the lowest amounts to pay off things right away. I personally chose the higher debt payments when I was doing this which was credit card and my car payment. Then went to my student loan debt. But, it’s up to you and your personal circumstances as to how you want to go about this. Just remember, credit cards have the highest interest rates and can really snowball if you are only paying minimums each month. There are other options as well, but if you need some help I recommend checking out the National Foundation for Credit Counseling.

Find Ways to Earn More Money

As you are budgeting and understanding where your money is going, you’ll be starting to cutback on your spending. This is great, but you can only cut back so much. A big part to becoming more financially stable is going to be earning more money. There are numerous ways you can do so like:
  • Starting a side hustle in your spare time
  • Increasing your salary by improving your career worth
  • Asking for a raise if you are long overdue
  • Get into the gig economy if need
  • Sell your knowledge and expertise as a freelancer/consultant
Earning more money can help ensure you reduce financial struggles and can be more at peace. But be warned, you want to be careful not to fall into the lifestyle creep trap as you make more money either.

Master Your Own Financial Literacy

A great way to become financially stable is start to educate yourself. Understanding money and budgeting may seem challenging, but it’s really not if you dedicate time to reading. You are already spending time on your budget and debt, which is a great learning tool. But you want to amplify that further so you become the master of your finances. When you are informed about debt, investing, and budgeting — you’ll start making stronger future decisions and be more conscious of current financial moves. And yes, you can teach yourself this! I wrote this in-depth personal finance 101 article, which covers all that I did to teach myself about money and investing. It might be helpful getting you to master your own financial literacy.

How to Be Financially Stable With A Low Income

If you’ve made it this far, I thank you and hope it provided some clarity for you. Yet after all that, you may be a bit discouraged. It can be a hard trap to breakthrough if you are battling low income, especially as expenses keep rising every year. I’m not going to sugarcoat it, it’s much more challenging to achieve financially stability with a lower income. But, it’s not impossible either if you put a plan together and stay patient. But out of all the steps mentioned above, your focus if you are struggling with making money, should be finding ways to earn more.

Part I

Low income can also vary from person to person as it depends on where you live and current expenses. One priority is to change your income status relative to your personal situations. Before you yell at me and say “No Duh!” hear me out. With the internet and gig economy, everyone has a chance to make money on the side. Not everyone is going to get rich doing this, but getting extra cash can be a game-changer to your plan. Yes, side hustles might be challenging if you have a full-time job and family to take care of currently. So your other two options are for your full-time job/career:
  • To ask for a raise at work (or find out what you need to do or show in order to get a raise)
  • Work on improving your salary worth (certifications, shadowing others at work, switching jobs, etc)

Part II

Part two of this, is to cut back expenses mercifully. I’ve never been a fan of pushing cutting expenses or extreme frugality, but if financial stability is a priority for you and your income growth is challenging, this is step is a must. Where to cut back hardcore:
  • Groceries
  • Living expenses
  • Transportation
You’ll be making some sacrifices now that aren’t fun, but the long-term payout and reaching your financial goals will be worth. Your temporary cutbacks might only last a year or maybe a few, but can have dramatic and lasting impacts. But only you can determine how committed you want to be to these areas.

Final Thoughts

Financial stability isn’t about being rich or reaching a particular number. It’s all about your mindset and the comfortability you feel in your life currently. You want the freedom to live on your terms and not be controlled by money and debt. The more control you have over your money, the more stability and peace you’ll find with your finances. By following the steps above, keeping the right determined mindset, and being patient — you will find your own form of financial stability. This post original appeared on Invested Wallet and is being republished with permission.