If you want to secure your future, you need to prepare for it as soon as possible. The uncertainty that you face should prompt you to take care of yourself and the means for you to have a good future. If you are married and with kids, it is all the more reason for you to ensure that you are financially capable of facing any emergency situation.
That is not really complicated to grasp but when you are burdened with debt, that is another story. Having to deal with debt put a couple of obstacles in your way. Given that idea, you know that your debt and a good future does not match.
What is financial stability
What you need right now is financial stability. But what exactly is it?
Financial stability is oftentimes confused with financial independence. In truth, they are quite similar except that stability requires more from you. When you are financially independent, you have the monetary means to buy what you need, when you need it. Being in this financial condition means you do not have to borrow money or ask it from someone else. The same is true for financial stability. However, as mentioned, the latter requires more. To be truly stable means even the unexpected expenses are taken cared of. You have prepared yourself so that you will not be ruined by any financial difficulty that is caused by external forces.
Usually, we get ourselves in debt because of our wrong decisions. However, there are also external factors to consider. These include:
an economy collapse
rising costs of living
a health condition
These are only a few of the things that could happen. This list could be longer if we make a survey of what the Americans experienced during the recession.
The bottomline is this, financial independence means you have the income to buy what you need to survive. When you are financially stable, you have the income and apart from that, you have the savings to finance any unexpected situations that require it.
How to be financially prepared for your future
Obviously, the better option between the two is financial stability. While financial independence may have been acceptable before, we all realized that after the recession, it is really not enough. If you really want to be financially prepared for your future, you know that you need to stabilize it.
Fortunately for you, being financially stable involves two simple concepts: paying off your debts and saving.
Paying off your debts
As mentioned earlier, a good future does not have room for your debt so this is one of the things that you must get rid of. It may seem like a daunting task but if you take it one step at a time, you should be able to accomplish your goal.
You have a lot of debt relief options to pay off your debt. Here are the most common.
Snowball method. This requires you to rank your debts according to priority. You pay the minimum for all the debts while putting all your extra money into the priority debt. That allows you to pay that off faster. When that first debt is done, you get the freed amount and you transfer it to the next priority debt while maintaining the minimum on the rest.
Debt consolidation. This type of debt relief option can come in two methods: debt consolidation loan and debt management. They will both provide you with a low single monthly payment scheme that is stretched over a longer payment period. The lower contribution is possible because of the longer term and a possible lowering of interest rate.
Debt settlement. This debt relief program focuses on debt reduction. You will convince the creditor that you are in a financial crisis so they will allow you to pay only a portion of your debt and have the rest forgiven.
Bankruptcy. This is usually advised as a last resort because of the credit score implications. It can go two ways. One is Chapter 7 wherein your assets will be liquidated and used to pay your creditors. Anything not paid will be discharged. The other is Chapter 13 wherein you will be subjected to a repayment plan by the bankruptcy court.
Growing your savings.
There are many benefits to having more than enough savings and financial stability encompasses all of them. When you have your savings, you can be assured of the following:
Medical funding in case someone gets sick.
Ability to pay for any home or car related repairs.
Protection for your debt payments and other basic necessity costs since emergency situations will not have to disrupt your usual budget.
Back up plan for your day to day expenses in case you lose your job.
Investment funds – in case you want to grow your money.
These are only a few of what you will get when you have enough savings. If none of these happen, you can always put your savings into your retirement fund. A lot of the pre-retirees are in a difficult financial situation because they did not give much thought to being financially stable. Come retirement, they had to delay it so they can continue working and thus have enough to pay what they owe. Be kind to your future self and see how much you need to retire comfortably. Although you will receive benefits like your social security, that may not be enough.
It pays to do your research and know what you can do to deter any financial crisis. Check out the Benefits.gov website to see the different grants and financial assistance that you can use. Anything that you cannot get here, must be prepared for through your savings. Grow your savings up to an amount that you are comfortable with. It pays to be prepared and nobody ever regretted planning for the future.