Are you financially stable? This question can be a sum of all the work you have been putting into your finances for many years. The answer to this question lies in many different aspects of your life that concern the money that you save and spend.
People often have different answers when it comes to the meaning of financial stability. As we start accomplishing our financial goals, we can come to a clearer understanding of our finances. Getting to the point of stability can take a lot of work and patience, which is why it is a good idea to reassess our finances once in a while. Here are some factors that can help you narrow down the answer to the question, ‘Are you financially stable?’
Safety Nets for Loved Ones
You might be happy and feeling great now, but there is no guarantee that you have a huge chunk of life ahead of you. While you probably do, the fact is that no one can say that for sure. If you have a spouse, children, or loved ones, you should have a backup plan in place in case the unthinkable occurs.
If you have an insurance policy in place or have planned for your demise, it can mean that your family and loved ones will remain financially stable in the event that something bad happens to you.
Well-Funded Savings Account
Another sign that you are financially stable is that your savings account is well-funded. Most experts suggest that you should have enough money to take care of 3-6 months of living expenses. After all, you never know when you will have to face an emergency, and your savings can help keep you on your feet while you look for more income sources or deal with the issue.
Retirement can feel like a long way off, but if you want to make the most of your retirement years, you have to start saving for it from today. It can be easy to put it off, but if you are on track for your retirement savings, it means that you are financially stable. Ideally, you should be putting 10-15% into your retirement account.
Are you financially stable? Not unless you have health coverage that actually does its job when it comes to protecting you. In most states, obtaining medical insurance is up to you. There can be many instances in life where you have an unexpected and quite frankly insane medical expenses. Instead of letting these expenses cripple you financially, you should have the proper insurance to support you.
Rising Net Worth
Rising net worth can be an indicator of your finances. You should calculate your net worth every few months since it can show you whether you are on the right track or not. There are some online net worth calculators that you can try out to calculate your net worth and ensure that you’re on the up and not spiraling.
Your Kids Have 529 Accounts
While financial protection for your family and your retirement plan can take precedence over your child’s tuition a decade from now, having money in the 529 accounts can be an indicator of financial stability. Your child will be able to take out a low-interest loan for college, but having some money saved is better since they won’t be forced to start their professional life with debt.
Even with overdraft protections, not overdrawing on a checking account is an indicator of financial stability. Overdraft fees can be a nuisance to deal with, which is why you should have sufficient money on-hand so that you don’t have to deal with them.
Credit Card Usage
If you use credit cards for rewards and convenience but not out of any necessity, then it can mean that you are financially stable. If you are able to pay off your credit cards each month without any stress, this is a good sign of financial stability and does a world of good for your credit.
Paying Bills on Time
If you pay your bills on time each month, this is a good sign of financial stability. How so? Well, it means that you have enough money to support your monthly expenses, which is the very definition of financially stable.
Don’t Lose Sleep Over It
There are many people who constantly stress about their finances – this causes them to lose sleep over it. You may be no stranger to these sleepless nights, either. Not worrying about your finances is another indicator that you’re in a good position financially.
So, are you financially stable? If all of these, or most of these, indicators apply to your life, then the answer is a resounding yes! However, you shouldn’t just stop at financial stability. If you want to live a life of luxury, you should now start focusing on increasing your net worth.