Financial Stability: Me, You, and Anyone

who wants it.

ECON 101
Project 1

Yuki Lee Chung

22200216
Financial Stability: Me, You, and Anyone who wants it.
Introduction

Have you ever gone broke? Ever worried about if you could cover all your monthly expenses? Or fallen short of
money when you needed it the most?
These are real-life scenarios and trust me, they are living nightmares.
To avoid them one must reach a position where they are financially stable, cause money might not buy you
happiness, but it surely can keep away unhappiness.
This essay will discuss why financial stability is important in one’s life and furthermore how we can achieve it.

What is financial stability?

Financial stability might sound confusing and complicated, but it’s just a way of describing the state in which a
financial system experiences low volatility, in other words, it’s the state in which the financial system is not
unstable.
When we mention financial stability there are two views: macro and micro. One encapsulates a broader view,
concerning businesses and countries. Whilst the other relates to our personal finances.
As you have probably guessed we will be discussing the latter.
Personal financial stability refers to the ability to maintain an income whilst avoiding debt. Other factors may
include the ability to add to savings, having money left over, and fully paying all monthly bills.

Why is it important
It can be very frustrating not knowing how much profit you will earn each month, or if the amount earned will be
enough to cover every expense. So being able to save up some money for a stormy day or an unexpected expense
can help relieve this stress tremendously, that’s why it’s so important to maintain a financially stable life.

The most obvious benefit of living a financially stable life is the money, you don’t need to worry about paying your
bills because you know you have enough funds to do so, you have paid all your debts, and now have enough
money to save for the future or to cover emergencies.
But It’s more than that…
Being financially stable has numerous other benefits for our overall health and well-being, which ranges far past
the ability to pay your bills on time.
Because you do not have to worry about money and expenses all the time, you feel less stressed, and because
stress is a huge contributor to a host of serious diseases like strokes, insomnia, and depression. reducing the levels
of stress preserves your health significantly.
You don’t worry about money, you feel less stressed, and now you have more time and a clearer mind to focus on
yourself and others around you. Because of this, you have sounder and better relationships.
Instead of feeling lost and disoriented, you feel more in control of your life, you are able to create and design the
path that you want to follow, able to give and help others, able to provide for your family, and teach your kids to
live a more financially stable life.
How to achieve it?
Now that we have seen the benefits and why it is important to live a financially stable life, how does one go about
achieving it?
Well, financial stability is a place one must reach, it’s a goal and like any goal, there are steps you must follow in
order to achieve it.

->Create a monthly budget

Financial stability starts with planning a budget and sticking to it. Create a budget and determine how much money
you are making and spending each month, this will make you aware of your financial situation and will make it
easier to determine where your money is going, where you spend the most, and what changes and adjustments
could be made that will allow for your financial stability.

->Save up for a stormy day

Crisis happens all the time, it’s important however that we prepare for them so that we are not left out to drown.
Have a plan in place and save up for your retirement. you should consider developing a passive income that will
keep coming even after you stop working. This way you will have a steady stream of income to sustain you during
retirement, or in case of crisis. It’s recommended to save up to at least 6 months’ worth of living expenses, in case
of a major financial crisis or job loss. knowing your expenses will be covered in case of an emergency will make
you feel more stable and confident in your financial situation.

Don’t forget to pay yourself first, save at least 10% of what you earn each month, and use this money to increase
your wealth. Set that money aside before you spend it anywhere else. If you do not pay yourself first you are
simply working to pay other people.

->Kill off your debt

If you are carrying huge debts like loans or credit card balance, it’s crucial to devise a plan to pay it off as soon as
possible. The longer you take to pay it off the more interest it accumulates, and the money you could be investing
you will have to redirect into paying off your debt.

->Increase your ability to earn

The best thing you can do for the sake of your financial stability is to invest in yourself. Improve yourself by
increasing your set of skills, gaining more knowledge, improving your health, and working on your career.
Like George Samuel Clason said in his book, The richest man in Babylon, “That man who seeks to learn more of his
craft shall be richly rewarded.”

->Set goals and stick to them

It’s important to create systems for spending, saving, and investing your income. You should set specific, realistic,
and attainable financial goals. Think about what you wish to accomplish, and how you wish your financial life to
look like in the future, and set goals aligned with the bigger image.
Financial stability is not about having money, but how you use your money.

->Protect your wealth

Unlike making money, spending it is very easy. it’s quite common to lose money or make poor investments. So
you need to reduce the risk of losing money as much as possible.
You can do this by spreading your wealth, having many sources of income, and diversifying your investments.
Don’t put all your eggs in one basket.

->Spend Wisely
One of the most important things you need to have in mind when working on your financial stability is to not
confuse desires with necessary expenses.
Control your expenses and live below your means. Expenses always tend to grow equal to your income, the perfect
example of this is when people get a raise. Instead of saving money or investing it in something that would give
them more return, people tend to spend more. This way money never increases, and you are stuck in the same
position as you were before even though your income increased.
And remember ‘income - expenditures = savings.’

->Make your money multiply

Unfortunately saving your money and not spending it unnecessarily is not enough to make you financially stable.
You also need to invest your money. Make your money work for you. Invest the money you save. When you
receive the return of the money you invested, you should invest these returns, this way you will slowly start to
build wealth. And will ensure a future income.

If you follow these steps, creating a budget, saving money for emergencies, paying off your debt, investing in
yourself, setting financial goals, spending wisely, and ensuring a future income, you will be setting your path to a
stable financial life.

Conclusion
Financial stability isn’t a number you have to reach, it isn’t about being rich. It’s a mindset. When you are financially
stable you don’t need to stress about money, you don’t have to worry about covering your monthly expenses or
falling short of money because you know you have it covered. You can focus your time and energy on other parts
of your life.
Financial stability is something you can achieve, it will take time, hard work, and a lot of sacrifices but it is definitely
worth it.
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