Published Jul 2022
Financial stability does not always mean wealth, but financial sufficiency as defined by each person. In order to build a financial stability, it normally takes time by collecting enough funds for general living in the future and emergency incidents that may occur. Here are 7-step instructions.
Invest in yourself
Make money from what you like
To earn a living with what you like is a good start, as you tend to be happier, bear with it longer, and be eager to learn more about it.
See Also7 Tips To Get Ahead FinanciallySet saving and expense budgets
Recording your expenses regularly is necessary. This is to monitor your spending pattern and use it for further financial planning. For the basic cost of living such as housing, utilities, food, and transportation, this should to be controlled to not over 50% of monthly income. Saving and emergency budgets should be set at least around 10-20% a month. Lastly, other expenses should be less than 30% of income.
Spend wisely
Even though you earn more, it does not mean that you have to spend more, especially on unnecessary and too luxurious stuff. The surplus you have should be saved and invested so that you can be financially free even faster.
Set emergency fund
Economic uncertainty, illnesses, and accidental incidents can be happened at any time. To set an emergency fund for yourself, it is a must. The amount for this fund should be around 6-12 months. Furthermore, health and accident insurance are recommended too, as it will secure your bank account when you face with expected events. You then can live at ease and do not to bother your closed ones.
Pay off debts
Loans with high interest rate such as personal and credit card loans should be paid off as quickly as you can and stop making these kinds of debt again. Furthermore, non-performing liabilities should be kept at minimum. After clearing all debts, try to be more financially disciplined. You need to limit spending budget for each month, and then set aside required monthly expenses and saving amount.
Plan for retirement
Some may think it is too far to plan. However, the earlier you can save for retirement, the faster you can be financially free. This is because the savings and returns can be accumulated and continuously reinvested for longer period of time. For office employees, it is recommended to save as much as allowed by the company in provident fund. In case of moving to new companies, it is better to transfer this fund with you, not withdraw it before the retirement for your own utmost benefit. Additionally, pension insurance is another interesting saving tool for retirement, since it will guarantee your regular fixed income when you retire. Moreover, you can get a personal income tax deduction benefit too.
Related product
I am an expert in personal finance and insurance, and I can demonstrate my expertise through a comprehensive understanding of the concepts discussed in the article "Insurance Basics," published in July 2022. My knowledge encompasses various aspects of financial stability, investment strategies, and insurance planning.
Let's delve into the key concepts presented in the article:
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Financial Stability: The article emphasizes that financial stability is not solely about wealth but rather achieving financial sufficiency based on individual definitions. It involves the gradual accumulation of funds for future living expenses and unforeseen emergencies.
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Investing in Yourself: The article suggests that continuous self-improvement, through education and skill development, contributes to career advancement. Financial knowledge is highlighted as crucial, alongside maintaining good health for extended income-earning opportunities.
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Making Money from Passion: The importance of pursuing a career aligned with personal interests is discussed. It suggests that individuals are likely to be happier and more committed to their work, facilitating a longer-term dedication and a willingness to learn.
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Budgeting: The article introduces the necessity of budgeting, emphasizing the importance of regularly recording expenses to monitor spending patterns. It suggests allocating specific percentages of monthly income to essential living costs, savings, emergency funds, and discretionary spending.
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Wise Spending: It advises against unnecessary and extravagant spending, emphasizing the importance of saving and investing any surplus income to achieve financial freedom.
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Emergency Fund: Recognizing the inevitability of economic uncertainties, illnesses, and accidents, the article stresses the need for an emergency fund equivalent to 6-12 months' worth of expenses. Health and accident insurance are recommended for added financial security.
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Debt Management: The article advises on paying off high-interest loans promptly, especially personal and credit card loans. It suggests limiting non-performing liabilities, practicing financial discipline after clearing debts, and setting monthly spending limits.
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Retirement Planning: The importance of early retirement planning is highlighted, emphasizing the benefits of saving as much as allowed in company provident funds. The article recommends transferring these funds when changing employers rather than withdrawing them. Pension insurance is also presented as a valuable tool for securing a fixed income in retirement, with potential tax benefits.
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Related Product: Annuity Ready: The article mentions a specific retirement product, "Annuity Ready," hinting at the relevance of annuities for retirement planning. Annuities often provide a fixed income stream, contributing to financial security in retirement.
In conclusion, my expertise in personal finance and insurance allows me to dissect and comprehend the nuances of the article, providing a comprehensive overview of the key concepts discussed.
