Being financially stable is very important for everybody. No matter how many fairy tales and stories you read, the reality is that we all want a comfortable life to live in. If you are running a family, then your finances will give stability to your children and spouse. You may be even having a few credit cards in your wallet, so you carry some debt which can affect your stability. So should you be worried about your financial security?
Well, here are 6 ways to know if you are financially stable.
1. You have an Emergency Fund
The biggest indicator that you are financially stable is that you have an emergency fund. It is a bit like having spare cash lying around that you can use when you are short. The emergency fund comes into play when you land up in an accident, lose your job, have to help a family member out, etc.
An emergency fund usually amounts to enough money for you and your family to survive for 6 months to a year.
2. You Pay Your Debts on Time
Paying debts on time is very important. It factors in with your credit score, shows that you are responsible and you avoid any fines. Additionally, it shows that apart from your monthly spending, you have money to spare for your debts.
3. Your Impulse Buying is Under Control
No one can really control impulse buying, but it is a part of us. Impulse buying often occurs when you want to buy that favourite item. It could be that box of chocolates, shoes, dresses, electronic gadgets, etc. Controlling it means you don’t allow yourself to buy it more than once in a month or week. Rather than buying a box of chocolates every time you go to the market, you buy it only once in the month.
4. The Debt is Manageable
The loans and the credit cards will rack up debt and strain your finances. With a house or some property, it is not difficult to get loans for a car or another piece of property, however too many loans will eventually strain your debt. Take too many loans and you will find yourself struggling to pay the debts on time.
Finding that you are able to pay your debts and still have cash to spare is a good sign.
5. Keep Track of your Credit Score
Many don’t practise this, but you need to start keeping track of your credit score. At least once every a year, take a look at your credit report. A credit report tells you everything you need to know about your financial situation. You can even learn about all the debt you are under and ensure you don’t take up more than you can handle.
A credit score of over 700 points shows that you are handling the debt well. It can happen that if you have debts, still you may have score above 700. That is what we call an Credit rich but financially poor syndrome. So please do not be carried away by high credit score if you have debts.
6. You are Investing
Staying financially stable is not about saving money. You have to make your money work for you and making safe investments is a good idea. Medical and life insurance is also not a bad idea and is useful.
Investments ensure that you are improving your sources of income.
So if you find yourself lacking in some of these points, start implementing them!
