The equation of finance to just having or making money is the biggest mistake made by many people. There are many aspects or disciplines when it comes to finance that one should apply in order to become financially stable. Then comes the question, how can one work towards attaining financial stability? Lack of proper knowledge about finance has led to the collapse of many big companies. In this article, we shall learn on the basics of good financial practices to keep us on check.
What is finance?
Finance may be termed as the principles of money management. It involves balancing of liabilities and assets to avoid loss and get an appropriate return from your business venture.
Here are some key principles towards financial stability.
Make your savings automated
Many times, people plan to save a fraction of their income but end up spending it because of one reason or the other. I bet occasionally, you have had the same problem. However, this is easily achievable if you make your savings automated. You can make this a reality by opening an online savings account. The system allows for automatic deduction of a portion of your salary immediately it is credited to your account. You do not have to worry about the abrupt emergencies that may crop up. Savings automation enables you to avoid unnecessary borrowing which may affect your subsequent wages.
Limit your impulse expenses
As you walk past a shop or a mall, you may see items that were not on your budget yet an inner urge pushes you to buy them. This has proved to be the biggest mistake often made by people. It messes up many people, causing them to screw their budget. The most important thing is not avoiding the items; you are tempted to buy but to fight them. Fighting them does not involve throwing blows but resisting the urge to buy. You can limit your impulse spending by telling yourself to wait or self-discipline. This gives you enough time to evaluate on the necessity of what you want to buy.
Taking a loan may at times seem to be the most convenient way to deal with unavoidable emergencies. However, this may turn into a terrible nightmare if the loans are not repaid on time or if the loan interest accumulates to unmanageable limits. This however, cannot be the case if you avoid debts. One of the most important reasons for avoiding liability is to prevent the high interest that comes with the loan. Living a life free from obligations gives you peace of mind because you do not have the stress that accompanies debts.
Pay bills automatically
Paying bills in time allows you to avoid unnecessary interests or late fees that are chargeable on your bills. To prevent this, it is crucial to automate your bill payments to ensure that they are paid on time. If you do not pay your bills on time, the service providers may terminate or sue you. This will have negative impact on your reputation or business.
Desire to grow your net worth
It is of great importance to know your net worth, if you are a person working towards increasing your wealth. The difference between assets and liabilities of an individual refers merely to their net worth. A persons net worth is the best method for measuring personal wealth. Your net worth enables you to track how you are progressing in terms of your wealth. An increasing net worth year in year out means you are increasing your wealth. Net worth enables you to manage your debts since it gives you a clear overview of your liabilities and your income. When need be, and you badly need a loan, some investors will not give you credit unless you reveal your net worth to them. If you do not know your net worth, it should be your first priority from now on.
Invest in your future
Almost everyone has a dream of having a good home, a family, and perhaps a good car besides other luxuries. It is therefore essential to accept the task of mending our future. The most significant step that we must all take to improve our future is investing in it. Investing in the future involves spending your time and money in something that may not give you profits immediately but would later give you overwhelming returns. The best way of investing in the future is by increasing your knowledge. This makes you viable to bigger jobs that have a higher salary. The secret to investing in the future is starting early. This is because everything requires some time to build.
It is essential to know where your money goes. This is the main reason behind analyzing your expenses. For companies, it is vital to track the costs and control them to a manageable level. Analysis of costs is essential in making a financial plan for future considerations. It also assists in improving productivity of a business by knowing how much it needs to make to overcome its expenses. Analysis of costs also enables one to forego unnecessary expenses for ones that are more vital if money is minimal.
Ensure the security of your family
The most meaningful goal in life is to ensure that our loved ones have all the basic needs for their day-to-day usage. Lack of these basic needs leads to disruption of our family bonds and may lead to depression. The most crucial step in ensuring the security of our family is by simply living below your income. This means that your expenses should not eat up all of your income, save some for rainy days to come. Another way is by getting good insurance covers for your family. This aids in situations, which are far beyond your financial capability. This will enable you to gain financial stability.
Financial stability is one of the most important pillars in one’s life. We should strive to be financially stable if we want to avoid risks and hiccups that come with financial instability. I am confident that the above principles will go a long way in propelling you towards financial freedom. Are you financially stable? If not you ought to start planning your way to financial security right now.