Northwestern Mutual Awarded Sixth Consecutive Top-Score on National Disability Equality Index MILWAUKEE, July 16, 2024 /PRNewswire/ — Northwestern Mutual announced today that the company earned its sixth consecutive top-score on the Disability Equality Index®. The recognition is a comprehensive benchmarking tool designed to recognize companies that are advancing inclusion practices and building a roadmap of … [Read more…]
More Northwestern Mutual advisors than ever before named to Forbes’ Top Financial Security Professionals and Best-in-State lists MILWAUKEE, July 10, 2024 /PRNewswire/ — Northwestern Mutual announced today that 650 of its financial advisors earned a spot on Forbes’ Top Financial Security Professionals and Best-in-State lists – the company’s largest-ever showing on the prestigious rankings. More … [Read more…]
Americans with a financial advisor expect to retire two years earlier according to Northwestern Mutual’s Planning & Progress Study Ready to Retire: 75% of those who work with an advisor say they will be financially prepared for retirement versus 45% of people without an advisor Free from Anxiety: 64% of Americans with an advisor say … [Read more…]
Your 40s can be a pivotal decade in your life. It’s typically a time of peak earnings, growing family responsibilities, and an increased focus on long-term financial stability. You may have a house, kids, and a busy job. College expenses may be looming. Maybe you’re hatching a plan to start your own business or buy a beach house that’ll one day be your empty-nester home.
To navigate these years successfully, it’s essential to make strategic financial moves that can secure your future and make your plans and dreams a reality. Here are some critical financial planning tips to consider as you move through your 40s.
7 Financial Moves to Make During Your 40s
In your 40s, you’re old enough to know what you want and likely have enough earning years ahead to achieve your goals — if you manage your money right. The following strategies can help you build wealth in your 40s.
1. Maintain or Replenish Emergency Funds
Life is full of unexpected twists and turns. Not all of them are fun, such an expensive car or home repair, a medical emergency, or losing your job. An emergency fund offers financial stability during a stressful time. It also saves you from running up expensive debt that could derail your financial goals.
A general rule of thumb is to have six to 12 months’ worth of living expenses stashed away for the unexpected. If you already have an emergency fund but it has been partly or fully depleted, you’ll want to prioritize replenishing it to maintain financial security.
Consider setting up automatic transfers into savings to build your emergency fund consistently. Keep these funds in a liquid, easily accessible account, such as a high-yield savings account, to ensure you can access the money quickly when needed.
2. Manage Your Debt
Debt management is a crucial aspect of financial planning at any age, but it becomes even more critical in your 40s. Since high-interest debts, like credit card balances, can significantly hinder your ability to save and invest for the future, you’ll want to prioritize paying them off as quickly as possible.
One strategy that can help is the avalanche payoff method. Here, you list your debts in order of interest rate from highest to lowest, then put extra money toward the highest-interest debt, while continuing to pay the minimum on the others. Once that debt is paid off, you put your extra funds toward the debt with the next-highest rate, and so on.
Alternative approaches to paying down high-interest debt include getting a low- or no- interest balance transfer credit card or taking out a personal loan for debt consolidation with a lower rate than you are paying on your cards.
Get up to $300 when you bank with SoFi.
Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!
3. Revisit Retirement Saving
In your 40s, you’re roughly at the midpoint between entering the workforce and traditional retirement age. How you invest and save for retirement at this point in your career can strongly impact your future assets and ability to one day retire comfortably.
If you’re not currently contributing to a retirement plan, such as a 401(k) or individual retirement account (IRA), now’s a good time to start. If you have been, it’s time to assess your progress. Consider how much of a nest egg you will need to retire and, using an online retirement calculator, whether your current plan will get you there.
If you’re behind on your savings, consider stepping up your contributions or, if you’re already contributing the max allowed, making “catch-up” contributions down the road. Starting at age 50, the IRS allows higher maximums designed to help people catch up on their retirement savings goals.
4. Plan for Childrens’ College Expenses
If you have kids, planning for their future education expenses may be top of mind. College costs continue to rise, and early planning can alleviate future financial stress. If you haven’t started saving for college expenses, you may want to explore opening a 529 college savings plan, which offers tax advantages and can be a flexible way to save for educational expenses.
An online college cost estimator can help you determine how much you need to stash away each month or year, based on the year your child will likely attend college and the type of school they might choose.
Just keep in mind that it’s important to balance college savings with other financial goals, like retirement. As kids get closer to leaving the nest, you may also want to encourage them to apply for scholarships and grants, and explore financial aid options.
5. Choose or Reevaluate Insurance Coverage
Insurance is an important component of financial planning in your 40s. You’ll want to evaluate your current insurance coverage and make sure it’s adequate to meet your family’s needs. This includes not only health and home insurance, but also life and disability insurance.
Life insurance provides financial security for your family should you die prematurely. If you don’t currently have a life insurance policy, consider purchasing one. If you do have one, you’ll want to make sure your policy’s coverage amount is sufficient to cover your family’s current living expenses, outstanding debts, and future financial needs, such as college tuition for your children.
It’s also a good idea to review your disability insurance, which protects your income if you’re unable to work due to illness or injury. Many companies provide a policy through work. However, you may want to consider supplementing employer-provided coverage or, if you’re self-employed, getting your own policy. This offers a different, but equally important, safety net for you and your family.
Recommended: Which Insurance Types Do You Really Need? Here Are 6 to Consider
6. Invest Outside of Retirement
While retirement accounts are crucial, investing outside of retirement can diversify your portfolio and help you achieve goals that may be five or 10 or more years away, such as a downpayment on a vacation home or a child’s wedding.
Though investing carries risk and can be volatile in the short term (which is why you generally don’t want to invest funds you’ll need in the next few years), an investment account has the potential to grow more than other types of accounts over the long term. Consider taxable investment accounts that align with your risk tolerance and financial objectives.
7. Meet with a Financial Professional
Getting expert advice on managing your finances can be invaluable at this stage of life. Whether you opt for regular meetings or simply go for a one-time consultation, a financial professional can provide valuable insights and help you navigate complex financial decisions.
An advisor will typically look at your whole financial picture and assist you with creating a comprehensive financial plan. This may include optimizing your investment strategy and ensuring you’re on track to meet your goals, including retirement, investments, and college savings.
The Takeaway
It’s never too late to take control of your finances. In your 40s, you are likely entering your prime earning years, so it’s a good time to focus on paying down debt, preparing for the next chapter of your children’s lives, and saving and investing for your future retirement. With some wise money moves, you’ll be set to make the most of this decade and beyond.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.
FAQ
What financial goals should a 40-year-old have?
Ideally, a 40-year-old will want to focus on several financial goals. These include:
• Establish or maintain an emergency fund with three to six months’ worth of essential living expenses.
• Reduce financial burdens by paying off high-interest debt.
• Ensure you’re on track with retirement savings by maximizing contributions to retirement accounts.
• Start or continue saving for children’s college expenses through plans like 529s.
• Consider investing outside of retirement to diversify your portfolio and build wealth.
How much should a 40-year-old have saved?
By age 40, financial advisors often recommend having three times your annual salary saved for retirement. This benchmark ensures you’re on track to meet long-term financial goals and maintain your desired lifestyle in retirement.
In addition, you’ll want to maintain an emergency fund with three to six months’ worth of living expenses.
Savings outside of emergency and retirement, such as investments in taxable accounts, can further enhance financial security. The exact amount can vary based on individual circumstances, income, lifestyle, and future goals.
How can I build my wealth in my 40s?
To build wealth in your 40s, you’ll want to focus on several strategies:
• Maximize retirement account contributions, taking full advantage of employer matches.
• Pay off high-interest debts to free up resources for savings and investments.
• Establish or maintain an emergency fund to cover unexpected expenses without derailing financial goals.
• Consider additional income streams, such as side businesses or rental properties.
• Diversify investments across stocks, bonds, real estate, and other assets to balance risk and growth potential.
Photo credit: iStock/shapecharge
SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Budgeting on a low income can be tough, but with proper money management, it’s doable. Less disposable income means less leeway in your budget, so being accountable and planning meticulously is key to ensuring financial stability. With the right approach and mindset, you can budget on a low income like a pro. Let’s explore three simple tips to help you succeed.
Step #1 – Figure out Your Monthly Income
List all income sources, including regular paychecks, part-time jobs, side hustles, and other income. Account for taxes and deductions to get an accurate picture of your disposable income. Using your net income for budgeting ensures accuracy.
To learn more: What Is Annual Net Income? [Calculation, Sources, And Definition]
Step #2 – Define your bills and Expenses
Knowing your spending is crucial. Define ALL your bills and expenses with personal budget categories. Categorizing expenses helps you see where your money goes and manage spending effectively.
To learn more: 110+ Personal Budget Categories for a Fail-Proof Budget
Step #3 – Reach a Zero Budget
A zero-based budget assigns every dollar to an expense or savings category, aiming for income minus expenses to equal zero by month-end. This strategy ensures every dollar is accounted for and maximizes financial efficiency.
To learn more: What is Zero-Based Budgeting and How Does It Work?
Higher Expenses Than Income?
Exceeding monthly spending requires immediate attention. Analyze your budget, prioritize essential expenses like housing and food, reduce non-essential spending, consider increasing income through side jobs, and seek advice for managing debt effectively.
To learn more: How to Overcome When Ends Don’t Meet
Analyze your Budget
Scrutinize expenses for necessary adjustments and correct categorization. Understanding where money goes gives clarity on financial habits and areas for improvement.
Prioritize Essential Expenses
Allocate funds first to necessities like housing and utilities before non-essentials. Cutting back on entertainment and dining out can free up resources for more critical needs.
To learn more: What Are Fixed Expenses? How to Budget for Fixed Costs
Reduce Expenses
Identify areas for spending cuts, such as impulse purchases or unnecessary subscriptions. Eliminating expensive habits helps reduce financial strain and increases savings potential.
To learn more: What Are Unexpected Expenses? And How to Avoid Them
Increase Income
Explore opportunities for additional income, like part-time jobs, selling unused items, or freelancing. Supplementing income can alleviate financial stress and provide resources for savings and debt management.
To learn more: Explore the Many Ways to Make Money
Seek advice if Debt is weighing you down
Start to pay down debts quickly. Look to lower debt interest rates through strategies like consolidation or restructuring as a last resort. Professional advice can provide insights on managing debt effectively and improving financial well-being.
To learn more: How to Get Out of Debt in 5 Easy Steps
How do you Survive on a Low Budget?
Surviving on a low budget requires careful planning and disciplined execution. Remember, it’s not permanent, and with strategic financial management, you can regain stability and work toward long-term financial security.
To learn more: How to Budget Money on Low Income
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Bonds are a cornerstone of smart investing, providing a dependable way to balance the ups and downs of the stock market. These financial instruments, though not entirely risk-free, offer a steadier income stream and a sense of financial security that can be particularly appealing during uncertain times.
By understanding how bonds work and their potential benefits, investors can make more confident and informed decisions. Whether you’re a seasoned investor or just starting out, incorporating bonds into your portfolio can help achieve a more stable and balanced investment strategy.
Definition of a Bond
A bond is a loan between a borrower and a lender. As the investor, you would essentially buy an I.O.U. note from a borrower. The note will include the term of the loan, the payment schedule, and any other relevant details.
The bond boils down to a promise from the borrower to the lender to pay you back in full, plus interest.
Who issues bonds?
Any organization can issue them. The typical institutions that issue bonds are large companies, the federal government, cities, and states.
The issuer of the bond will often explain why they need the money. For example, the government may need it to build new roads, or a company may need it to fund new research. The reason behind the issuance of bonds varies, but for one reason or another, the organization needs money.
Types of Bonds
There are several types of bonds, including:
Corporate bonds: These are issued by companies and can be traded on public markets. They are used to raise capital for business operations, expansion, or to refinance debt.
Municipal bonds: These are issued by cities, states, and other local governments to finance public projects such as schools, highways, and utilities. They are tax-exempt, which means the interest paid to investors is not subject to federal income tax.
Treasury bonds: These are issued by the federal government and are considered to be among the safest investments because they are backed by the full faith and credit of the U.S. government.
High-yield bonds: Also known as “junk bonds,” these are issued by companies with lower credit ratings and therefore carry a higher risk of default. They offer higher interest rates to compensate for this risk.
Convertible bonds: These are bonds that can be converted into a predetermined number of shares of the issuing company’s stock. They offer the potential for capital appreciation in addition to the interest paid to bondholders.
Zero-coupon bonds: These are bonds that do not pay periodic interest to bondholders. Instead, they are issued at a discount to their face value and the bondholder receives the full face value at maturity.
Floating-rate bonds: These are bonds whose interest rate is tied to a benchmark rate, such as the London Interbank Offered Rate (LIBOR). The interest rate on floating-rate bonds adjusts periodically based on changes in the benchmark rate.
Are all bond issuers the same?
No. It may be obvious, but some issuers are more trustworthy than others.
Generally, U.S. government bonds are considered the safest possible bond. Many deem these bonds as practically risk-free. Of course, there is always risk involved, but it is rather unlikely that the U.S. government would default on its loan to you. Less trustworthy issuers are shady companies that you don’t trust.
A risky bond issuer will be forced to offer a higher interest rate than a stable issuer. That is because it is less likely that they will be able to repay the loan of the investor. If that happens, then the investor will lose their money. Bonds that offer high interest rates are considered junk bonds. That is because it is likely that the issuer will be unable to repay their investor.
The U.S. government offers the lowest interest rate on its bonds. That is due to the fact that they are most likely to repay the investor. Stable private companies will fall somewhere in between. Bonds that offer lower interest rates are considered investment-grade bonds.
How does a bond work?
When an organization needs money, it will issue bonds with the terms already set. As an investor, you will need to accept the terms or pass on the bond. The details of the bond will include the exact terms of the bond. Let’s look at what will be included in each bond offering.
Issue price – The issue price is the price that the investor will have to pay for the bond.
Face value – Typically, the face value of a bond is a nice whole number like $100 or $10000. It is unlikely that you would find a bond available for $99.47.
Coupon rate – A coupon rate is equivalent to the interest rate that is on the bond. The issuer of the bond will pay this rate of interest to the investor.
Coupon date(s) – Throughout the lifetime of the bond, the issuer may be required to make payments to the investor. The coupon dates will outline the amount of these payments and when they need to be made.
Maturity date – A maturity date is basically the end of the bond. On this date, the issuer of the bond must pay the face value of the bond to the investor.
When you have all the information, you will be able to make an informed decision about a bond purchase.
What impacts bond prices?
Many things go into the price of a bond, but these are the most common.
Issuer’s credibility. If a shady company is offering a high yield bond, it will likely be classified as a junk bond. The risk will be reflected in the price of the bond.
Maturity date. The longer you have to commit your money to the bond, the higher the yield you will receive. The bond issuer is paying for the long-term use of your money.
Interest rates. Interest rates have the largest impact on bond prices. Higher interest rates will lead to lower bond prices.
Are bonds a risk-free investment?
No. Some bonds are significantly riskier than others. If a bond offers a high yield, then it is likely a risky investment.
Some people associate bonds with guaranteed returns. That is just not the case. You can lose money through bond investment. However, if you choose your bonds carefully, then this may be less of a worry. For example, if you choose to stick with U.S. Treasury bonds, then it is likely that your money will stay safe.
How does an investor make money with bonds?
When you purchase a bond, you can make money in a couple of ways.
First, you will receive interest payments regularly based on the coupon rate of the bond.
Second, you can sell the bond for more than you paid for it. If interest rates go down, then bond prices will rise. At that point, you will have the option to sell your bond for a profit before maturity.
How to Buy Bonds
There are several ways to buy bonds:
Directly from the issuer: Some bonds, particularly municipal and Treasury bonds, can be purchased directly from the issuer. This may be a suitable option for investors who want to hold the bonds until maturity and receive the full face value.
Through a broker: Investors can also purchase bonds through a brokerage firm. Brokers can help investors find the bonds that best match their investment goals and risk tolerance, and handle the transaction on their behalf.
On a bond exchange: Some bonds, such as corporate bonds, are traded on public exchanges, similar to stocks. Investors can buy and sell these bonds through a brokerage account or through a bond exchange-traded fund (ETF).
Through a mutual fund or ETF: Investors can also invest in bond mutual funds or bond ETFs that holds a diverse portfolio of bonds. This can be a convenient way to gain exposure to a variety of bonds without having to purchase them individually.
Before buying any bonds, carefully consider the issuer’s creditworthiness, as well as the terms and conditions of the bond. It’s also a good idea to diversify your bond holdings to reduce risk.
Final Thoughts
Investing in bonds is one way to diversify your portfolio.
Remember, bonds are not entirely risk-free. Do not assume that you will make money on a bond investment. It is entirely possible to lose money by investing in bonds.
Before you make any decisions about investing in bonds, research your options. It is important to understand all the risks involved before you choose to invest your hard-earned money.
In the pursuit of financial stability and prosperity, setting clear goals is paramount. In this guide, we’ll explore ten essential financial objectives that can pave the way to a secure and fulfilling future. Whether you’re aiming to build wealth, eliminate debt, or achieve financial independence, these goals will serve as your roadmap to success. Let’s embark on this journey towards financial empowerment together.
Be A Constant Learner
Make continuous learning a priority in your financial journey. With so much to discover about money management and personal finance, adopting a mindset of constant learning equips you with essential knowledge for making informed financial decisions.
Pay Yourself First
Prioritize your financial well-being by committing to paying yourself first. By saving a portion of your income before anything else, you safeguard your financial future and ensure you have resources available for future needs and opportunities. Start small and keep saving more.
Multiple streams of income
Diversify your income sources to safeguard your financial stability. Whether through side hustles, investments, or additional employment, creating multiple streams of income provides financial resilience and opens up avenues for wealth accumulation beyond traditional income streams.
To Learn More: Explore the Many Ways to Make Money
Get Out of Debt
Break free from the shackles of debt to regain control of your financial future. Eliminating debt not only relieves financial stress but also paves the way for future financial growth and stability. By prioritizing debt repayment, you clear the path for building wealth and achieving your financial goals.
To learn more: How to Get Out of Debt in 5 Easy Steps
Spend less Than You Earn
Achieve financial stability by ensuring your expenses remain below your income. Embrace the practice of spending less than you earn to avoid debt accumulation and cultivate healthy financial habits. Consider participating in a no-spend challenge to reinforce mindful spending and bolster your savings.
To learn more: No Spend Challenge: The #1 Fastest Way To Save Money
Increase your Saving Percentage
Boost your financial well-being by incrementally increasing your savings rate. Saving a significant portion of your income, ideally 20% or more, contributes to long-term wealth accumulation and financial security. Adopting this habit allows you to gradually grow your net worth while maintaining financial flexibility and resilience.
To learn more: How Much to Save Monthly – Your Savings Percentage
Give Money Away
Cultivate generosity by incorporating charitable giving into your financial plan. Whether through donations to worthy causes or acts of kindness, sharing your resources with others not only benefits those in need but also fosters a sense of fulfillment and abundance in your own life. Prioritize giving as a cornerstone of your financial journey.
Keep a Financial Journal
Track your financial progress and milestones by maintaining a financial journal. Recording your financial goals, achievements, and challenges provides valuable insights into your financial journey and serves as a source of motivation to stay focused on your objectives. Regularly reviewing your journal empowers you to make informed decisions and stay on track toward financial success.
Teach others About Money
Share your financial knowledge and empower others to achieve financial success. By imparting solid money management skills to those around you, you not only contribute to their financial well-being but also reinforce your own understanding and commitment to sound financial principles. Serve as a mentor and advocate for financial literacy within your community.
Retire on Your Terms
Take control of your retirement planning to ensure you retire on your own terms. By diligently saving and investing for retirement, you create the financial foundation necessary to maintain your desired lifestyle without relying on earned income. Start planning and saving early to secure a comfortable retirement that aligns with your goals and aspirations.
To learn more: What Happens If you Don’t Save for Retirement
Smart Financial Goals that You Need
Discover the importance of setting smart financial goals to transform your financial future. Utilize our setting financial goals worksheet to define clear objectives and develop a roadmap for achieving them. Setting smart financial goals empowers you to take control of your finances and pursue a path towards long-term financial success.
To learn more: 10 Smart Financial Goals That You Need
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Discovering financial independence doesn’t have to be complicated. In this guide, we’ll explore 10 incredibly simple methods to help you achieve financial freedom effortlessly. Whether it’s through saving, budgeting, or increasing your income, these easy strategies will set you on the path to financial independence in no time. Then, you can enjoy time freedom and not stress about the 9-5 grind.
How to Become Financially Independent to Create the Life you Want
Learn the essential steps to achieve financial independence and build the life you desire. Take action today to build wealth and secure your financial future. With the right strategies and tools, financial independence is within reach, and you can take control of your financial destiny.
Find more ideas: How to Become Financially Independent: Create the Life You Want
Become Financially Sound
Achieving financial soundness is the first step towards effective money management. Learn how to improve your financial health and become financially sound within the next 30 days. Take proactive steps to enhance your financial stability and secure a brighter financial future starting now.
Learn How: How Quick can you Become Financially Sound?
Are you Financially Stable?
Discover the exact habits needed to achieve financial stability and take control of your finances. Financial stability means being in charge of your money, and this guide provides easy ways to attain it. Explore these simple yet effective tips to achieve financial stability and transform your financial future.
To learn more: 32+ Simple Hints Someone is Financially Stable + How You can be too!
Money Mantras to Repeat to Boast Your Mindset
Harness the power of these top money mantras to cultivate a mindset of wealth and achieve financial freedom. Affirm your success and transform your financial situation with these powerful mantras. Pick your money mantra and unlock the keys to ultimate financial freedom with these empowering affirmations.
To Pick Your Money Mantra: Top 50 Money Mantras to Boost Your Financial Freedom
What is Your FI Number?
Discover your FI Number Calculator and unlock the path to financial independence. You may be surprised you are closer than you thought! This tool is crucial for anyone seeking to change their financial future. Learn how to calculate your FI number and take control of your financial destiny today.
To calculate yours: How to FI and Know Your FI Number Calculator
Become Debt Free to Grow Wealth
Discover the keys to financial independence by uncovering why living debt-free might lead to true wealth. Gain practical insights and strategies for achieving lasting financial security without the burden of debt. Perfect for individuals seeking to take control of their finances and build a solid foundation for future wealth.
To read more: Is Being Debt Free the New Rich & Secret to True Wealth?
What Are Your Smart Financial Goals?
Gain valuable insights into setting smart financial goals and transforming your financial future. Learn how to create a roadmap for success with our downloadable financial goals worksheet. Start taking control of your finances today and pave the way towards achieving your financial aspirations.
To learn more: 10 Smart Financial Goals That You Need
Do You Use the Key Components of Successful Budgeting?
Unlock the secrets to successful budgeting with our comprehensive guide. Learn about essential budget tools, strategies for adjusting your budget, and setting financial goals for transformative money management. Discover the freedom that comes with creating budgets tailored to your expenses and financial aspirations.
To learn more: What are Key Components of Successful Budgeting?
Time to Budget Your Money With Percentages
Master the art of budgeting your money with percentages using the simple and flexible Cents Plan Formula. Take charge of your finances and manage your money in a way that works for you. Learn practical tips for budgeting with percentages and start on the path toward financial stability today.
To learn more: How to Budget Your Money With Percentages with the Cents Plan Formula
Learn How to Make Money Online
Explore 65 easy ideas on how to make money online for beginners and kickstart your online income journey. This guide offers a variety of options, from starting a blog to selling products, to help you make money from the comfort of your home. Discover simple yet effective ways to increase your income and achieve financial independence.
To learn more: 50+ Ways How to Make Money Online for Beginners
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
A certificate of deposit (CD) can be a good option to consider as a savings vehicle for a child. With a CD, you can deposit money for a specific term, such as a few months to a few years, and earn a fixed rate of interest.
CDs are relatively safe investments; they are federally insured for up to $250,000, and can offer minimal but steady growth for a period of years.
An adult can open a custodial account for a child who will assume management of the CD account when they reach adulthood. However, there are some pros and cons you should know before opening a CD, including how CDs compare to other investment vehicles for your child.
Understanding Certificate of Deposits
A certificate of deposit is considered a type of savings account. The account holder deposits the funds and agrees not to withdraw the money for a specific period of time, in effect, loaning the money to the bank. The bank pays the CD holder interest based on the total amount deposited and the maturity date of the CD (the term).
You can open a CD at a bank or a credit union; this can be done in person or online. Most CDs are federally insured up to $250,000.
If the account holder decides to withdraw the funds before the end of the term, they are typically charged an early withdrawal penalty, often forfeiting a portion of the interest. For example, if you deposit $1,000 in a two-year CD, and you want to withdraw the funds after one year, you would only be entitled to the amount of interest earned up until that point, minus any fees or penalties.
CDs are generally considered a conservative investment, but the interest earned on a CD tends to be less than some other investments because CDs are lower-risk investments. When opening a CD account for a child, it’s important to consider whether the peace of mind and a lower return is what you’re after, or whether you’d like an investment that potentially offers more growth, but also possibly more risk.
Can a Child Have a Certificate of Deposit?
A CD for kids can be a solid start to an investment plan for your child. It’s also a way to help explain the dynamics of saving to them and what it means to earn interest on a principal deposit.
That said, minors cannot legally open CDs. An adult must acquire a CD for the child and then transfer it to them when the child reaches adulthood.
One thing to keep in mind about a CD for kids is that funds held in CDs and other savings accounts can affect a child’s eligibility for future financial aid. This is an important consideration, which could affect how much a family might pay for college tuition.
[embedded content]
Who Would Own the CD?
A minor cannot apply for a CD, but they do own it. That means that the account cannot be given to anyone else.
An adult, usually a parent or legal guardian, can open a custodial account for a minor under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act, which is an extension of the UGMA. A custodial account allows one person to deposit funds into an account for another. The account can be transferred to the child once they reach adulthood. The age of adulthood is not federally mandated. However, in most states, it is age 18.
Get up to $300 when you bank with SoFi.
Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!
How to Give a Certificate of Deposit to a Minor
Here’s how to set up a CD for a minor child, and transfer the account to them when they reach adulthood.
Select the Bank Where You Want to Purchase the CD
Explore bank account options and decide which bank or credit union you want to hold the CD for your minor child. Compare interest rates based on the amount you intend to deposit and the term for the CD. Also, look at any penalties and fees the bank might charge.
List Yourself as the Custodian and the Child as the Owner
Fill out the form online or in person stating that you will be the custodian and the minor will be the owner of the CD. You will be asked to provide identifying information such as your Social Security number and the child’s Social Security number.
Deposit the Money in the CD
Deposit the desired amount into the CD account, taking into consideration how different amounts and terms might affect the interest rate paid.
Discuss What to Do With the Funds
Opening a CD account for a child presents a “teachable moment,” in that the minor child, who is the owner of the CD, needs to think through what the money can be used for once the CD reaches maturity. When the CD matures, you can cash it out, or renew the CD. If the child is of legal age at that point, the account is transferred to the child. You may have to contact the bank to remove your name from the account.
Recommended: What Are No Penalty CDs?
Are CDs a Good Choice to Help My Child Save?
CDs are among the lower-risk investment options, and a good way to help a child save.
That said, CDs are also low-yield investments. If you are saving for your child’s education, funding a 529 college savings plan might offer more growth potential over time, if that’s your goal.
For longer-term savings, opening a Roth IRA may also be a good choice for parents hoping to provide financial security for their child.
Tax Implications of CDs for Kids
There are tax considerations to opening a CD for kids. Taxes are typically due on earnings when the CD matures, but a child will likely be in a lower tax bracket than an adult, so at least some of the earnings could be taxed at a lower rate.
The IRS taxes kids’ unearned income, such as interest, dividends, and capital gains, in tiers. In 2024, for a child with no earned income, up to $1,300 in unearned income is not taxed. The next $1,300 is taxed at the child’s tax rate. Any amount over $2,600 is taxed at the parent’s rate. So that is something to keep in mind.
The custodian of a CD should also be aware that they can give up to $18,000 in 2024 to a child without owing gift taxes.
Financial Aid Implications of CD Earnings
There are some implications of CD earnings regarding financial aid. If a child is applying to college and has savings in a UGMA, those assets will need to be disclosed on the Free Application for Federal Student Aid (FAFSA). It may be that the student will have to pay more of their college costs than if their money had been put in a 529 college savings account.
Is a CD a good investment for a child? That depends on the length of time between the opening of the CD account, and when the child reaches the age of majority. If the child is a teenager, a CD will provide a guaranteed amount of money, and there is no risk of loss if the market drops.
However, CDs don’t earn a lot of interest, and a growth-oriented investment might earn more and grow faster if the child is younger.
Finally, as noted above, if you are saving for the child’s education, you may want to explore a 529 college savings account, instead of or in addition to a CD for a child.
Where Can I Find a CD for a Child?
Most banks and credit unions offer CDs, and they allow custodians to open accounts for a child. Online banks can also be convenient. Many offer competitive interest rates and lower fees. Be sure to compare the interest rates and APY of each bank and make sure to understand the penalties that will apply if you withdraw the funds early.
The Takeaway
There are many ways to help your child save. Which one is the best depends on the ultimate use of the funds. CDs are lower-risk, they are federally insured up to $250,000, and they may offer higher interest rates than regular savings accounts. However, other options to consider are a 529 college savings account and a Roth IRA.
CDs are easy to open; most banks and credit unions offer these products. They earn interest on the amount invested as long as the funds are not withdrawn before the CD’s term. If the custodian does withdraw funds before the maturity date, the bank will charge a penalty.
Most online banks also offer CDs, and an adult can open a custodial account online for a child. The child is named as the owner of the account, and they will assume management of the account when they reach adulthood according to state laws.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.
FAQ
What is the best way to save money for a child?
The best way to save money for a child depends on your goals. Some options include a savings account or a custodial CD, a 529 college savings account, or a Roth IRA. Explore the options to determine which is best for your situation.
Can you buy a CD as a gift?
Yes. Under the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) an adult can gift a CD to a child.
Can I open a CD for my child?
Yes. Opening a CD account for a child is easy using a custodial account. The child will be named as the owner and you as the custodian. The owner (the child) will assume full legal ownership of the CD when they reach adulthood. The account cannot be given to anyone else but the named holder.
Photo credit: iStock/Hispanolistic
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
4.60% APY SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Inside: The exact habits you need to learn how to be financially stable. Financial stability is when you are in control of your finances. Make sure you have these money habits!
Are you ready to move from financially sound to financially stable?
Well, the good news is this is something you can easily accomplish and we are going to show you exactly how to do it in this post. Learn over thirty simple traits to prove to yourself that you are financially stable.
One of the great things about being money financially stable is it means that you are less worried about money. You are established with your finances and you are consistent on how you spend and save your money.
It is a great feeling to be financially stable because you know that your bills are taken care of and everything that you want to spend money on that you actually can!
The Money Bliss Steps for Financial Freedom is a guide to help you become financially independent. Along your path, you will go through many different journeys and many different seasons, but it is a great feeling to know that you are in a good place financially.
Becoming financially stable is something that anybody is capable of doing.
It just takes determination, a growth mindset, and a desire to be wise with your money.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
What does Financial Stability Mean?
Financial stability is when you are confident in your personal financial situation. You have money to pay monthly bills, set aside for big purchases, invest in your future, and be able to sleep at night.
When you can do these above things, that is when we can say that a person is financially stable.
When you define financial stability, the definition should motivate you to improve your money situation because the more you work towards becoming financially stable, the better the opportunities present themselves.
It is one step up from being financially sound and moving closer to financial security.
Another way of saying financially stable is of good financial standing.
Overall, the financially stable meaning is you have made wise decisions that will ultimately let you live the life you want. One step closer to financial freedom.
How to Be Financially Stable
The good news is you only need to do three steps to become financially stable plus they are not complicated.
This is exactly how do you become financially stable…
It is just a habit that you need to start doing.
If you have bad habits with money, then you are not going to have the success with money that you need. If you have good habits with money, then you will end up becoming financially stable.
Just a side note, If you need a good book on changing bad habits into good habits. I highly recommend Atomic Habits by James Clear. It is a great book to help you change the habits that need to change, and start to live the life that you want.
Now, back to the three steps to becoming financially stable.
If you want to learn how to become financially stable, then this is what you need to do.
1. Pay Yourself First
This is the most important habit that you can do to become financially stable.
Many times, I feel like I sound like a broken record about the importance of how you need to pay yourself first. It doesn’t matter if it is your very first job in high school, starting out at 21, or quickly approaching your 50s, you need to pay yourself first today.
Take your paycheck and automatically save a certain percentage.
If you have never saved before start with 10%.
If you know that your spending is out of control plus you have the income to save a higher percentage, then plan to save 20-25% ot your income.
When you first begin to save, the goal is not the amount you save; it is about the first time that you begin to save.
It is about proving to yourself that you are capable of saving and seeing that account, increase over time will continue to motivate you.
So, if you want to be financially stable, then you must pay yourself first. Set up a separate savings account or an investment account where you will put that money.
2. No Debt
Second, no debt. Period.
If you cannot buy something in cash, then wait until you have the cash available to make the purchase. Do not use debt just because you have access to credit.
If you want to be financially stable over the long term, that means you must eliminate consumer debts.
Now, before you freak out and say, “I can’t be financially stable because I have so much debt that is dragging behind me and holding me back.” Don’t freak out. You can make a plan to get out of debt.
By getting out of debt, you are proving that you are on the path to becoming financially stable.
In the meantime, you just don’t go into any more debt.
If you are in your 20s, steer clear from debt and do not get into the debt trap.
The Trickly Mortgage Debt Conversation….
Because owning a house comes with a price and it comes with a premium since there is a cost to upgrade it, pay property taxes, and so much more. Plus this varies greatly in an HCOL vs LCOL area.
Do your research and figure out is it more cost-effective for you to purchase a home and pay the mortgage payment or is it better to rent and not have the responsibilities of being a homeowner. This is a personal situation that you must determine what works best for you and it is very location and market driven.
For example, we bought in a high cost of living area before the prices skyrocketed. Thus, our mortgage is way less than the cost of rent. So for us, we are still financially stable because we have a mortgage because it is cheaper than rent (and by a lot).
On the flip side, if you are just starting out and trying to purchase a home, it may be more cost-effective for you to keep renting to stay out of debt and become financially stable quicker. Then you will be able to reach financial independence faster.
3. Invest Your Money
The last piece to becoming financially stable is you must invest your money.
This is not the time or place just to be stuffing money under the couch or in a savings account that is earning .02%. You need to invest your money in the stock market.
The best way to invest is on a consistent basis. Every paycheck you invest a certain amount consistently. It does not matter if the market is up or the market is down.
The returns from investing will be greater than doing nothing with your money.
Doing nothing with your money means that you are actually losing money when you account for the cost of inflation.
So, you must invest your money.
One of the types of income is passive income, and you can earn passive income through investing.
A huge step to becoming financially stable is to diversify your income. This may not be as important to you today, but if you are in that category of “I don’t want to work anymore” or retirement is on the horizon.
Your financial future can be secured through investing in your portfolio.
Recap – How to be Financially Stable at any Age
You can become financially stable at any age – 20, 25, 30s, without college, or even in your teens at 17 or 19. You can even be financially stable with a low income.
The formula is still the same for everyone.
These are the three things you must do for financial stability:
Pay Yourself First
No Debt
Invest
If you are serious about wanting to be financially stable, these are the three steps that you need to take. It is not rocket science.
It is very simple, clear steps to make sure that you are successful in the long term with money.
Now, let’s dig into the habits and traits of someone who is financially stable.
Learn:
Traits of someone who is financially stable
This is when we can say that a person is financially stable.
In this section, we are going to dive into the qualities, traits, and habits of people that are financially secure.
These are things that you can start working on today. Over time you will begin to make better solid money choices going forward.
These are solid money habits that will transform your financial future.
These are simple and easy ways for you to become financially secure.
1. Emergency Fund
An emergency fund is the backbone of financial security – there is absolutely no way around it.
The goal is for you to never use your emergency fund. But let’s be real, there will be a time or a place that you will have to dig into your emergency fund because an actual true emergency exists.
A financially stable person has an emergency fund to fall back on when times get tough.
Here is more information on how to build an emergency fund and the steps that you need to build one fast:
2. Plan to Be Debt Free
Like we said earlier, one of the basic steps of how to become financially free is to have no debt.
However, for too many people that would automatically say that is not in the cards for me. Paying off my debt is way too difficult. But, not for the financially stable person!
I am here to tell you that you can become financially stable by creating a plan to becoming debt free and actually stick to it.
That means your debt balance is going down each and every month. Plus you know your debt payoff date because that paying off debt is one of the best decisions that we ever personally made.
Also, it does not matter if good debt and bad debt – the concept promoted by many financial gurus. Debt is debt.
Debt means that you owe somebody else and you are going to have to pay it back at some point for a premium. So, the sooner you pay off your debt, the better of you will be.
3. Save 20% of Income
Do you save at least 20% of your paycheck? If so, then you know what financial stability means.
When you are financially stable, you are not living paycheck to paycheck and you automatically save money at the beginning of the month when your paycheck comes in.
The best place to start is to start saving at least 20% of your income.
If you are not quite there (yet), then look at one of our main money saving challenges. They are plenty of savings numbers to start small and then work on the bigger challenges. Prove to yourself that you save money.
Since saving money is easy for them, they work on increasing their savings percentage each year. Personally, I find it a better challenge to increase that savings percentage more than anything else.
4. Spend Less Than You Make
In order to make progress, your expenses are less than the money that is coming in.
That does not mean the amount of money coming in is the same amount that you can be spending. The reason why is you have to account for the money saved adn invested.
You learn how to live below your means.
This may mean giving up a coffee, a trip to the salon, happy hour, or something you do out of habit in order to start saving money.
Remember, the goal for this type of person who is financially stable is they spend less than they make. They may spend on the little luxuries here and there because they are able to do since they have set money aside and they are not overspending.
5. Mastering Money management Skills
The best trait of somebody that is financially stable is they understand the basics of money management.
This does not necessary mean the person is in love with spreadsheets, budgets, numbers, and reads money management books every single second. This means they understand the basics.
You earn, you save, you spend.
You save more, spend less, and you prioritize your money goals to make sure you are making the progress on your financial journey that you want to do.
Many times financially stable people start to enjoy learning about money management and tend to dive into their finances even further. Once they get started, they want to learn more about their money situation, and how they can improve their finances quicker by making a few more changes.
6. Their Finances are Exciting
You don’t have to be an Excel spreadsheet nerd to find that your finances are exciting.
This type of person enjoys waking up checking their balances and seeing a positive increase in their net worth.
They find it exciting, they find it motivating. It makes them realize all of their sacrifices is making a difference in the long term. They look at the greater picture and saying I’m not going to work till I am 65; I may look at retiring when I am 50.
They are working hard today and enjoy finding ways to improve their money situation; which they find exciting and fun. You love quoting these money mantras daily.
7. Month or More Ahead on Bills
A financially stable person uses their income from this month to pay for the next month. They are not living behind where the income coming in is going is paying for the current expenses.
They are actually a full month, maybe even two, maybe even three months ahead of their bills.
For example, their paycheck from July will be their August spending. For some that want an even bigger cushion, their money earned in July is actually going to be for their September spending.
That is a sign that somebody is financially stable and has the ability to avoid temptation and not to spend the extra money.
8. Sinking Funds are a Priority
A financially stable person sets aside money regularly for expenses in the future. These are called sinking funds.
These buckets of money is money allocated for a certain purpose.
One of the most popular sinking funds that most people have is for vacations, kids activities, home repair, or car repair. Those are probably the most common.
You can have as many sinking funds as you want as a financially stable person. Another option is just to have one big sinking fund that will cover whatever is needed in case something be happens. A wise person knows how much money they need to cover these expenses.
A financially stable person utilizes sinking funds to make sure they are able to meet unexpected expenses when they happen.
9. Invest in Stock Market Consistently
In the last two years, the stock market on average typically earns 13.9% each year (source).
The reason that this is important is your money can make you money without you doing anything.
Once you have your investment account set up and automatically contribute a slice of your paycheck, then you select a fund or a few stocks of companies you believe in. Starting your investing system is not as bad as you would think.
By investing in the stock market consistently, you are more likely to have higher returns than somebody who invest once a year, twice a year, or three times a year.
By investing either every week or every month, the likelihood that your account size will increase is greater than when you try and time the market.
I’ll be very honest…the average person has no idea how the stock market is going to react and even most experts. However, you can take an investing course, like Trade and Travel with Teri Ijeoma, and learn about buyers zones and seller zones. This is the best financial knowledge someone can have and you probably will not lose money by attempting to figure it out yourself.
This investing course is a great resource and something I highly recommend all of my readers to take. Read my Trade and Travel review.
Because the amount of the course is eye-opening, I can pretty much guarantee it will be less than the amount that you can lose in the stock market by yourself.
That is what a savvy person would do – invest in the course and then invest in the stock market.
10. Focused on Next Money Goal
A financially stable person knows exactly what they have done to get where they are today. Plus they know exactly where they are headed to in the future.
They don’t waver on their next money goal.
They have short term financial goals that they are determined to make happen. That is their number one or two priority in their life because they know that by reaching their money goals, they will have more time freedom in life.
At the end of the day, having money equates to freedom.
This is not the same as having money does not equate to success. There will always be the age-old debt on whether is money everything.
The answer may surprise you, but at the end of the day… money does equal freedom.
11. Saving for Retirement
If I don’t save for my retirement, then who else will help me in my older golden years? That is exactly what a financially stable person would ask.
They know that social security and all the government programs might run out of funding, so they are focused on saving for their retirement and most financial state. They are in control of what they are able to control. You cannot control future government programs or tax rates.
In addition, they are using a Roth IRA to get the maximum contributions that they can have each year for retirement. They are savvy enough to get the maximum contribution from their employer’s 401K match.
This type of person won’t be wondering… What Happens If you Don’t Save for Retirement?
12. Able to Vacation When They want
These are the people that you probably envy the most because they paid cash for the vacation that you financed.
A financially stable person is not worried about having to pay for the trip on the way home. They are savvy and use a vacation fund that they contribute to on a regular basis.
That right there helps them to go on vacation each and every year.
Don’t be jealous! Join the bandwagon and start traveling the world today.
13. Money Set Aside for a Rainy Day
As much as we like to think we can predict the future, in reality, we do not know what the next day, week, month, or even year can bring. And in many circumstances, you may be caught off guard when difficulties come.
If you have a loss of income and still have bills to pay today, that is where having a rainy day fund set aside will help you be prepared.
This is a step to becoming financially secure and a long-term habit to embrace.
A person who has a rainy day fund that will cover at least six months of living expenses is somebody that is financially secure.
They know that hopefully, they will not have to use that money, but in case they do, the money is available to them.
14. Don’t Cry When Something Breaks
When you’re financially secure, you know things that are going to break.
And as much as it sucks, you are not going to be in tears, trying to figure out how to pay to replace that item. You understand the concept of… It is what it is you move on.
Replace the item and you go on with your day.
Since you know you have money set aside for various purposes, there is no reason to cry. It may not be how you feel like spending money, but that is just part of life.
When you are financially insecure and a light comes on in your car, that is a red flag that something is wrong. Many people freak out because they don’t have the money set aside for a $500 or $1,000 repair.
So you know when you are financially secure when you can laugh it off, shake it off and move on with your day.
15. Fun Spending Can Happen
This is one of the best reasons for being financially secure…you can spend money!
When you decrease your other expenses, you can increase the amount of fun spending. There are great benefits to becoming aware of your financial situation.
Too many times, people give up to their money situation. Instead of saying, no, no, no all the time, you will get to a position where you can say yes yes yes! I want to do this and this!
You do not feel guilty about spending extra money!
At this point, you know you have earned whatever it is you want to spend money on.
16. You Can Sleep at Night
This is one of the best traits of a financially secure person! Their finances are NOT waking them up in the middle of the night wondering “oh my gosh, how am I gonna pay my bills, how am I going to pay my rent, how am I going to pay my car payment, I am sick of my job, etc.”
You quit worrying about do I have enough money to make it to the end of the month. That is financially security right there.
When you can sleep at night knowing all of your bills, expenses, and saving are taken care of. You know deep down that you are on track of your financial future.
That is financial security at its best.
If you are in a situation right now where you can’t sleep at night, then you need to learn how to drastically cut expenses. You must get a hold of your situation before it spirals any further out of control.
17. No Frivolous Spending
Financially, even though a financially secure person can spend money when they want. They have the money to be able to spend, right?
Most choose not to be frivolous with their money.
(Hint: that is why they stay financially stable.)
They tend to be a thrifty person knowing a good price to purchase an item. They know when something is overrated or overpriced.
Even if they can afford it, they are just not willing to spend money on it. That is okay because they are in the situation of being financially secure because of the solid money decisions they have made.
Spending frivolous money here and there can up quickly. Even something as low as $10 or $20 here or there may not impact your financial picture in one day. If you add it up over the course of a year, it can become $3,650 or $7,300. Just by frivolously spending a small amount each day.
18. Know Your FI Number
Your FI number will help you to make the jump to financial freedom.
You know what it will take for you to become financially independent – specifically, the dollar amount needed.
In the FIRE community, it is typically known as your FI number, which is your financial independence number. The number is the amount of your net worth and the amount saved up, so you can start living off of your investment income.
This number will vary from person to person.
It is based on your personal situation. The variables that impact your FI number include:
Your income today
How much you plan to spend today
The amount you save today
How much you plan to spend in the future
Your age now
Age you want to quit working (aka retire)
Typically, most couples with kids can start looking at FI number in the $1.5 million range. The first reaction is that the number is either WAY LOWER than they thought it would be. Yes, because we have been taught by “financial professionals” that you need so much more in assets in your retirement accounts than you actually do.
The time is now to become a financially secure person and learn your fi number today. Here’s a great resource to help you.
19. Diversify Your Income
Just as with as above and knowing your FI number, financial independence becomes more likely to happen once you start diversifying your income.
A financially stable person earns all three types of income.
Most people rely on earned income only. If you only rely on earned income, then you reach a max threshold of what you are able to earn.
So a financially secure person has multiple buckets of income; they are diversified in investments, real estate, or side hustle. The key to long term success is finding ways to make passive income.
20. Budget isn’t AS Important
A trait of a financially secure person is they know how much they are able to spend, how much they need to save, and the amount of money that they come in every single month.
They do not need to budget down to the very last line item. (thank goodness for many of you reading this!)
A financially secure person has an overall sense that income exceeds their spending and saving goals.
That is financial security.
While a budget may help them stay focused and a more detailed budget may help them reach their longer term goals.
It does not mean that a budget is necessary. You can still have a loose budget and know that you are still making ends meet because they have a system set up and a system set in place.
Budgeting is not as important as it was previously.
21. Splurging is Okay
This is one of the best feelings as a financially secure person is knowing that it is okay to splurge. It is okay to spend extra money. It is okay to stop cutting corners at every single turn.
You remember back to the days when each month was a struggle to make ends meet. That is not the life that you live anymore; you live a completely different life. And now, it is okay to splurge.
And to be very honest, for most people, once they become financially secure, it is actually really, really hard for them to loosen that tight fist on their money and start spending it.
22. Same Page with Finances with Spouse or Significant Other
They share the same money vision and together they set smart financial goals. All of their decisions are made together.
Did you get that keyword??? Together. Meaning with the other person.
While they may not agree on every single line item of their budget or how they spend money individually, they still set aside money for each of them to spend as they please. Around here at Money Bliss, we call this money a slush fund.
Because at the end of the day, as a couple, they know they are still making progress in the right direction for the long term. So, these couples do not worry about the short term of how you spend your $100 each month if you are reaching your goals and that happens once financial security sets in.
23. Net Worth Grows Significantly Each Year
If your net worth does not grow significantly each year, then you got a problem.
A financially secure person knows their net worth and has systems in place to keep it growing significantly each and every year.
It’s not just one or two percentage points typically, you can expect a much higher rate of growth of 8-10%. Once your net worth increases, the bigger the bucket for the percentage of growth.
24. Credit Cards are Paid in Full
Financial security means you were able to pay your credit card bill in full each and every month without blinking. This is a mantra of a financially secure person.
They chose to use their credit cards wisely so they can get points, cash back, and travel benefits.
But, they are also cognizant that each and every month that credit card is paid off in full; this type of person will not carry a credit card balance for any reason. Period.
25. Prepared for Large Purchases
Nothing states financial security more than being able to go out and replace $5000- $10,000 worth of appliances or home repairs or something similar.
A financially secure person realizes that they have to be prepared for large purchases since they are going to happen.
It is only a matter of when a big purchase will happen.
This person is consistently setting money aside in a sinking fund for those large purposes. In our house, we like to call it the big murph fund.
We know that it may be a small remodel project, an appliance that needs to get fixed or looking at replacing a car. Many items can fall under this big murph fund umbrella. For us, we do not set aside money for each of those purposes in their own sinking funds because then we would not able to maximize our investments.
Instead, we estimate how much money is likely needed and set aside for large purchases that are likely to happen in the next one to two years.
Ways to Save $5000:
26. Your Health Matters
Financial stability means that you are able to spend money on your health and it is a priority for you and your household.
You start realizing the benefits of taking care of your body, eating properly, and managing your health in better ways.
The light bulb starts going off and says slaving at my work for 60 to 80 hours a week may not be worth it. While the income may be great, a financially stable person may feel like they are killing themselves inside for the benefit of others.
A financially secure person knows that their health matters more than money does.
You are more likely to spend money on organic produce because you know it is better for your body. You consistently review to see if you are spending your time in ways that benefit your overall health.
27. Bad Money Habits Are a Thing of the Past
We have all had them.
We have all made stupid money mistakes.
And the best part is a financially secure person has learned from their bad money habits and made changes so they never happen again.
All of the things that they used to do, they don’t do anymore. Bad habits are something that happened in the past. While they may regret it, which is absolutely okay and part of working through the process to make further progress.
Their past mistakes are not going to hold them back from their future self and build solid money habits.
28. Giving Money is Generous
When you are able to give 10% of your income and not be panicked about making ends meet, that is when you know that you have reached a higher level of financial security.
Giving money is generous.
It is something that helps society come together and as a community making the world a better place.
By you being able to give money will help somebody else become a better version of themselves. We have all had others that have helped us.
By giving money, you can pay it forward. It can be something as simple as paying for the people behind you. It could be something grand like having a building named after you because you made a massive donation.
The size of the giving does not matter. It is the fact that you decided and made the conscious decision to start giving your money.
29. People Ask You about Money Questions
When others start looking towards what you have accomplished in your financial journey, that is when you know you have created an environment of solid money management skills.
People will start coming to you asking questions on how they can improve their money situation. And that is fabulous!
That means that others view you as being financially secure and stable in your personal finances. You deserve a pat on the back and motivation to keep up the hard work.
30. Happy With Your Financial Path
Remember that saying, “If you are happy and you know it, clap your hands.” Well, as a financially secure person, it is when you wake up and look at your overall financial picture and say, “You know what, I’ve got this, I’m on the right path,” and you put a big grin on your face. And you pat yourself on the back.
As a financially stable person, you are proud of what you have overcome, the difficult challenges you faced, and now you are excited about where the next step is going to take you and your future.
It is not roses and happiness the entire way; there are ups and downs along your path that got you to a financially stable place.
But deep down you know that you are on a stable future with a solid path.
31. You Know You are In Control of Your Money
This type of person knows exactly where their money goes.
They are in control of their money; their money doesn’t control them.
They make the decisions on how, when, why, and where they spend money.
They are not told by outsiders how to manage their money. A financially stable person has control over their money and in the long run, it opens up the doors of opportunity.
This is a sign of financial independence.
How Much Money is Financially Stable?
How much money do you need to be financially stable?
This will depend on everybody’s personal situation.
If you are single and only providing for your one household, the amount of money that you need is much less than a family of six to eight people. In view of that fact, the more people that you’re responsible for, the more money that you need to become financially secure.
Let’s put some number on the question of how much money is financially stable.
3-6 months of expenses
Positive net worth
No debt (or a solid plan to get out of debt)
Able to give 5% of your income
Saving at least 20% of your income
$100k of F-you money (read JL Collins book for terminology)
Increasing saving percentage each year
At a bare minimum, you could estimate to need at least $25,000 for a single person or $100,000 for a family of four.
These assumptions include you continuing to live below your means and not regressing from the progress you made.
However, most people feel more financially secure when their net worth hits $250,000 or $500,000. Once you hit millionaire status, you are financially secure.
Are you Ready to Move from Not Financially Stable to Financial Stability?
You are in charge of your destiny.
You are able to go from one place to another, but you have to be willing to take the jump, take the risks, and seize opportunities.
So if you are not sure that you are ready to move on to financially stable, you need to be financially sound first. For now, save this post and come back once you are ready to move to the next step of becoming financially stable.
If you are ready to move to financial stability, then you need to start today and make all of these habits of somebody who is financially stable a part of your life.
There is no “Oh, I’m gonna wait till tomorrow.” Because then you are just going to keep putting it off. Tomorrow needs to become today.
The sooner that you can become financially stable, the better off that you will be.
Procrastination is just like having a plan, but not setting it into motion. You actually need to take action and start today. Enough planning, enough procrastination.
Start slow with easy habits. A good habit here and there. Keep building on those habits and you will slowly step-by-step learn how to become a financially stable person.
It does not take a huge monumental stream of income to achieve financial stability. All it takes is perseverance to make better yourself.
You can become the next millionaire with no money!
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.