Taking The First Step Toward Financial Stability

Financial freedom is often described as having both the time and the money to live life on your terms, and freedom over your personal finances can have several definitions:

The ability to pay for an emergency using a savings account balance.
If you’re considering a job change, financial freedom allows you to take time off before starting your next job.
For many people, financial freedom is simply the peace of mind that you have when you can pay all of your bills on time.

Money is like oxygen, because it’s an essential fuel we all need to live.

Contents

More, More, More

Unfortunately, some people get caught up in a culture of striving for more, more, more – which isn’t a particularly healthy or fulfilling approach to life. Many consumers in this situation move from “want to want”, and they’re never happy with what they already have.

This mindset can have a huge impact on your personal finances, because you don’t have financial discipline. These people don’t create a personal budget and stick to it, and they can’t save money for future needs.

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A better approach is to set financial freedom as the destination- the place that will make us content and satisfied- and then work out the most efficient way to get there.

Financial freedom is following a recipe; it’s just like baking a cake. In this article, we’re going to focus on the very first step to financial stability – which is to get out of debt and get back on top of your personal finances.

Key Steps

If you’re seeking financial stability, start by creating a plan to save more money and to get out of debt. The fuel that’s going to make that happen is cash, not monopoly money or fake check stubs, cold hard cash that requires work in order to earn it.

One way to generate more income is to add some part-time work, or to start a side business. Rather than focus on the dollar amount of your debts- that may seem overwhelming- set a goal for the additional amount of income you hope to earn.

Why Paying Down Debt Is Important

Being in debt can seem like a slippery slope, due to the interest and late fees that accrue on overdue payments, and this type of situation can quickly snowball out of control. Once you start taking responsibility for the situation and start making progress, however, you’ll quickly find the light at the end of the tunnel.

Pay down one debt at a time by increasing the monthly amount you pay- an amount above the minimum payment. Choose the debt with the highest interest rate, since you’ll save interest costs by paying off the debt sooner.

After you pay off that high-interest credit card balance, for example, move on to the next debt balance. As you see yourself making progress, you’ll gain confidence and feel more in control of your personal finances.

Avoiding Stress

For most people, having debt isn’t the thing that is stressful – it’s the debt collection activities that happen as a result of falling behind.

Being pursued for debt can be an extremely stressful and humiliating experience. When people are pursued by multiple creditors with multiple streams of debt collection activity, the situation compounds to such an extent that many people feel they can’t cope. They choose to bury their heads in the sand by not opening letters, avoiding phone calls, and detaching from the situation.

However, when it comes to debt, avoidance isn’t the best strategy… it can provide temporary relief, but it isn’t a long-term solution. If you want to take the first step toward financial stability, start by finding out where you are today, and then tend to the financial fires that are in your life before they get out of control.

Take The First Step

In summary, the first step to financial freedom might not be a glamorous one, but getting out of debt will allow you to lay a foundation on which to build a stable future – and have the financial freedom that you crave.

This post is for educational purposes only.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) https://www.accountingaccidentally.com/

(you tube channel) kenboydstl

Image: Bullseye, Jeff Turner CC by 2.0