Oct 22, 2024
What’s financial stability? It’s something everybody wants, but not everyone knows how to get. That’s because financial stability means different things to different people.
For some, financial stability might mean a big salary and a fat bank account. For others, it’s simply not feeling overwhelmed by debt and bills.
Today’s economic uncertainty might make you think that financial stability is impossible. High inflation and talk of economic uncertainty have many people feeling nervous. But it’s important to remember that anyone can become financially stable—even if your resources are modest. You can reach a point where you don’t worry about paying your bills. You can comfortably live within your means. You can save more regularly. And you can enjoy your hobbies without going into debt.
Learning how to become financially stable may help you deal with economic uncertainty. And it could help you stay focused on your financial future.
Being financially stable is important because it can impact your financial health. It can also affect your mental health. Studies show that financial worries can lead to stress anxiety.1
When you feel financially stable, you don’t worry about paying your bills and handling your debts. Financial stability means you:
But many people don’t live this way. According to research from the Federal Reserve, 31% of Americans felt worse off financially in 2023 than they did in 2022. And 37% say they would struggle to cover a $400 emergency expense.
Even in a good economy, it can be hard to achieve financial stability. The same Federal Reserve Report noted that 33% of Americans say they’re living comfortably and 19% are just getting by.2
Because of inflation, many people’s salaries aren’t keeping pace with higher prices. They might feel like their money doesn’t go as far as it used to. Higher interest rates have also increased the cost of debt, putting more stress on budgets.
You can’t control inflation and interest rates. But you can protect your finances with healthy financial habits—even during periods of economic uncertainty.
While financial stability and financial security may sound similar, they’re different ideas. Both are important for your financial well-being.
Think of financial stability as the first step in reaching financial security, which is more focused on the future.
Financial security lets you look beyond your daily finances with a goal to stay financially stable throughout your entire life.
Of course, financial security feels different for each person. For many, it means knowing their retirement plan is sound, that they can afford to send their children to college, and that they’re on track to paying off their mortgage and other debt.
According to a 2024 Discover® Personal Loans survey, four in five Americans have anxiety about their financial situation.* But it doesn’t have to be that way. Practicing healthy financial habits now can lead to financial security. Building financial stability, even if the economy feels uncertain, can reduce stress. To start feeling more financially secure, follow these six steps.
Living within your means is a key to financial stability. That can be hard to do if you’re not sure where your money goes each month.
A budget can help you see what you’re spending each month and where you can cut back. Many people don’t like budgeting because they feel it might limit them. Try the 50/30/20 rule to simplify your budgeting. Here’s how it works:
You might have the best of intentions to live within your means, but then life throws a curveball like a fender bender or leaky roof. Suddenly, you’ve got major expenses you didn’t expect. Aim to build up your emergency savings to cover three to six months of living expenses so you can handle any unexpected expense that comes your way.
Turn financial stability into financial security. Focus on creating wealth that will last decades. Retirement tools like a 401(k) or individual retirement accounts (IRAs) can help grow your money while lowering your tax burden. Consult a tax professional to learn more.
It’s hard to feel financially stable if you’re stressed about debt. Consolidating your higher-interest debt into a personal loan could make your debt easier to manage. You may even be able to pay it off sooner. Unlike a credit card bill, a personal loan is a loan you pay in installments. So, you’ll know the exact date the personal loan is paid in full.
Budgeting carefully and cutting back on spending could help you become financially stable. Another way is to try to boost the amount you earn. For example, improving your job-related skills and knowledge may lead to a promotion. Or consider working with a career coach to improve your interviewing skills and resume, which may help you get a higher-paying position.
Some of life’s expenses, like medical bills, are too big to fit comfortably into your budget. If you learn to borrow wisely, they won’t damage your financial stability. Lenders check credit scores to understand each borrower’s creditworthiness and decide what interest rates and loan terms to offer. The higher your score, the better the interest rate you may be offered.
Here are some ways to improve your credit score:
The meaning of financial security and stability is feeling in control of your money, even during economic uncertainty. It means being able to pay your bills without worry and having some extra money left over for saving and for fun.
And when you need a little extra help, a manageable amount of debt that you can pay off in a reasonable time frame may help you maintain your financial stability for years to come.
Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.
The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover Bank, its affiliates, or successors
*ABOUT SURVEY
The national survey of 1,500 U.S. residents ages 18 and up was commissioned by Discover and conducted by Dynata (formerly Research Now/SSI), an independent survey research firm. The survey was fielded from April 16 through April 23, 2024. The maximum margin of sampling error was +/-3 percentage points with a 95 percent level of confidence.
