How to Become Financially Stable: 12 Steps to Financial Security

Financial security. Sounds like a dream, right? If you’re wondering how to become financially stable, you’ve come to the right place.

If you’re one of the many people who feel stress surrounding the topic of personal finance, you’re not alone. 

According to research done by the Global Financial Literacy Excellence Center, 60% of respondents indicated feeling anxious when thinking about their personal finances. 

Studies also showed that financial anxiety is not only bad for your mental health, but for your physical health too, as people with high financial anxiety were more likely to have past-due bills for treating a health problem.

How to Become Financially Stable in 12 Steps

With all of this in mind, taking control of your finances can be broken down into a series of small steps that you can check off your list one at a time. Keep reading to learn the 12 critical steps to financial security.

1. Audit Your Finances

First and foremost, it’s important to audit your finances to evaluate your income and see where and how you’re spending your money. 

Determine what monthly expenses are recurring and stable (i.e. rent or mortgage, insurance, loan payments, utility bills, etc.) and what expenses are inconsistent (i.e. dining out, entertainment, travel, emergencies, etc.) 

You can use a combination of salary calculators and budget templates to create a savings and debt payoff plan that suits you.

By auditing your expenses, you’ll be able to have clear categories for your expenses and see how your monthly earnings and expenses play out. From there, you can move on to set realistic goals.

2. Make Financial Goals of All Sizes

Goals can be as small or as large as you want them to be, and you’re free to adjust them as you see fit! Getting started is one of the toughest elements of getting out of financial insecurity. It’s okay to start small.

When you go set goals, it’s important that your goals are realistic based on your checking account balance, income, and overall financial standing. 

If you have a lot of credit card debt with a high-interest rate, one of your goals might be to pay down the debt. Perhaps you start by putting aside a little money each week. This could be a set dollar amount that feels attainable or a percentage you calculate based on your earnings. 

Something as simple as packing lunch for a week and putting the money you saved from dining out into your savings account can make a big impact over time. 

Setting short-term and long-term financial goals will help increase financial stability and give you small wins to celebrate in the short term.

3. Avoid Lifestyle Creeps + Bad Habits

Do you find yourself ordering out on a nightly basis or forgetting to pack lunch for yourself?

It can feel like a luxury to go out to lunch—think about phrases like “ladies who lunch” or “treat yourself”—but this could be a bad habit to get into if you’re trying to increase your financial stability and take a journey towards financial freedom. 

Instead of giving in to the lifestyle creeps that try to take over, plan ahead and be mindful of your spending. 

Start your week off by meal planning or going grocery shopping, so you have easy access to food at home. Depending on your lifestyle, it might be helpful to make some food at the beginning of the week. 

Meal prepping can be a daunting task, so break it down! Instead of prepping full meals, consider prepping some elements of a meal like a large batch of grains, (rice, quinoa, etc.), roasted veggies, or a protein that provides you the flexibility so you can adapt the ingredients for different meals. Actively pursuing good habits can help replace bad habits!

4. Open a Savings Account 

Many savings accounts do not have a minimum balance to open, so you can literally go online and open a savings account right now! Consider opting for a high-yield savings account (HYSA) that provides a higher interest rate on savings. 

An HYSA is a savings account that you open through a bank that typically pays a higher interest rate on deposits than regular savings accounts. These accounts are also known as high-interest savings accounts. 

Banks that offer these accounts may not have brick-and-mortar locations, which cuts back on their overhead costs and in turn, allows them to offer better rates to customers.

5. Chip Away at Your Debt 

Debt comes in all shapes and sizes, but all debts have one sure thing in common; they produce real anxiety and stress. 

Credit Card Debt

If you have enough money to chip away at credit card debt, do it. Credit card debt is often one of the most expensive types of dept.

If you do have a lot of credit card debt, consider looking into credit cards with a lower interest rate, or asking your credit card company if you can negotiate a rate change.

Regardless of the interest, paying as much as you can towards your credit card debt to become debt-free will always work in your favor. Keeping your credit card debt down will also help you maintain good credit and credit scores.

Student Loan Debt

Student debt relief may be in limbo, but student loan repayments have been paused without interest for now. 

On November 22, 2022, the U.S. Department of Education announced an extension of the pause on student loan repayment, interest, and collections.

Payments will resume 60 days after the Department is permitted to implement the program or the litigation is resolved, which will give the Supreme Court an opportunity to resolve the case during its current term. If the program has not been implemented and the litigation has not been resolved by June 30, 2023 – payments will resume 60 days after that.

According to Nerdwallet, if you do continue making payments, you won’t pay any new interest on your loans during the forbearance. This 0% interest rate will save you money overall, even though your payment won’t be lower.

6. Build an Emergency Fund

Building an emergency fund can sound daunting. Instead of making it a stressful activity, have some fun with it!

Consider making a game out of it and participating in the viral Envelope Challenge where you consistently put aside bits of money for 100 days. There are lots of creative savings plans you can try out. See what works best for you, your budget, and your goals.

In the end, you’ll end up with thousands set aside—and maybe you’ll have had some fun doing so!

7. Start a Retirement Plan 

If your company offers retirement savings options through a 401k, take advantage of that! Many companies even incentivize retirement savings by matching a percentage (or all) of your contributions up to a dollar amount.

If this is not the case, (looking at you freelancers and contract workers), consider setting up an IRA to start your retirement savings journey. 

There are different options, including Roth IRAs. These retirement savings accounts are taxed at your current tax bracket instead of later when you theoretically will make more and have a higher tax bracket. 

There are other options like SEP IRAs, which are available for the self-employed. There are a plethora of options out there. Explore many options to determine which works best for you based on your unique financial situation. Any way you look at it, retirement savings work in your favor and will help put you on track toward financial freedom in the long run. 

8. Create Regular Check-Ins on Your Monthly Expenses to Watch Your Financial Gains

If you’re not used to budgeting, create regular check-ins for yourself to see how your monthly expenses are shaping up.

Have you had an unexpected cost (or a few) this month? Have you been on track with your savings goals? Checking in with yourself will help increase accountability and promote good financial habits.

9. Find Places to Earn Extra Money to Achieve Financial Stability

In an economy where inflation is outpacing income increases, many people want to make extra money. This can happen through side hustles, selling your stuff, or gig jobs. A gig job is a temporary, income-earning job based on one-time projects, and frequently serves as a side hustle for extra income. Gig jobs are perfect for folks who need flexibility in their schedules and who cannot commit to a full-time job. 

Additionally, it might be worth it to consider weekend jobs here and there when you want to make some extra money. Jobs like rideshare driving and food service deliveries through apps can be a great way to make extra cash when you need it without burning yourself out.

10. Customize Financial Advice to Your Life 

There is a lot of advice on *exactly* what you should be doing, which can be helpful for some people, but overwhelming for most people. Instead of trying to follow a plan word for word, take every piece of advice and adapt it to what works for you and your lifestyle.

Everyone has different priorities and there is nothing wrong with that. You should live your life according to your goals, not goals that someone else suggests for you.

If you’re still struggling, consider reaching out to a financial advisor who has expertise in the subject and can help you determine custom solutions based on your situation.

11. You Can Always Save 

Even if it’s the tiniest amount, always save a little bit here and there.

If you use cash, consider putting the leftover change in a jar. Watch the change pile up over time.

If saving money has traditionally been challenging for you, it might be worth looking into “keep the change” options on your checking account that automatically round up to the nearest dollar and deposit the change into your savings account without you having to do it manually.

12. Don’t be Discouraged by “Failure”

If you exceed a budget or receive an unexpected bill, don’t throw all of your efforts away. One of the keys to becoming financially stable is repetition and consistency.

Mistakes, flubs, and unexpected financial blows will be a part of your journey, but don’t let them take you off course!

Financial stability is a lifelong goal that usually ebbs and flows with the waves of life. Know that if you’re struggling, you’re not alone. Nothing is forever, and you do have the power to increase your financial freedom by taking little steps at a time. 

If you’re looking for more information and advice on how to become financially stable, explore these related articles:

• How to Increase Your Salary
• What’s a Good Salary? Determining a Salary That Fits Your Life
• 40+ Ideas to Save Money Each Month Starting Today