Growing up in a nuclear family and having only an elder sister, tilted the dynamics of an ideal Indian household quite a bit. So we really did not have any boys in the house to compete with or share our parent’s biases with. They had two girls since I was born after my sister, they already had a doting daughter, so decided to fulfill their dreams of having a son, by raising me as one. But to be fair, my parents raised us both being financially stable and how!

My mother was a working mom all through our growing years. And there was one advise that she gave in her sage way that I will take it to the grave. I want to share that advice with all of you today. She told me never to be financially dependent on anyone. No matter what rubbish the world throws at you, how hard you need to persevere or struggle at a job, you need to work. This was not a power struggle or an advice to be independent so that I can splurge, but that if calamity and ill-faith like divorce or death of a spouse strikes, I am prepared. I must be honest, I have not completely taken her advice in my life and as I write, I do regret that. They say you learn from your own mistakes. Well, I did and here’s hoping that this may be helpful to you readers too.

What does financial stability mean to me?

The best definition I liked was of the International Monetary Fund (IMF). It states; “Financial stability is defined in terms of its ability to facilitate and enhance economic processes, manage risks, and absorb shocks”. To make it more relevant to us, I would substitute the word economic processes to personal progress, but I absolutely love the terms, manage risks and absorb shocks. Those are the superpowers financial ability holds. It helps make you independent, frugal and prepared for all that life throws at you.

What are some of the ways to be financially independent?

There are many books, articles, seminars and financial consultants out there who are waiting to hold your hands and walk you through this tough phase of your life. I am a Commerce graduate and still, I was finding it really hard to understand some of the investment tools and how the market works. I started financial planning very late in my professional life, so I have little to show as I write this. Yet, these four aspects helped me to take a step closer to financial stability.

Step 1: Understand your money

We all earn differently. Financial planning and stability are not only for those who are making a lot of money. It is for everyone, housewives, mothers, freelancers, and professionals. The first step to financial stability is to know where your money’s at. What is your income, what are your regular expenses, like rent, home loan, education fund etc and the amount kept aside as savings each month?

It is basically tracking every penny you earn. This step requires discipline. There are many apps on your phone that can help you with this. But you will have to be diligent to feed in the data. I say, start with one month at a time. Track the smallest of your expense, even the candy bar you bought on your way back from a long walk. This step will help you to know your spending patterns and determine how to save more.

Step 2: Set a goal and a budget for yourself

In this step, determine your current situation. Based on your income, expenses and savings portfolio assessed above, you can ascertain your current financial condition. Be brutally honest with yourself. Now, from there set yourself a goal. A realistic one – be it buying a home, paying off your debts, living a balanced life or saving up for your business or passion. Once you have the goal in mind, you will be in a better place to begin what’s called “budgeting”.

Step One has helped you find out what you need to cut back on. Now find out if you need to get a second job to fulfill the goal set out, or live more frugally, do so. Plan out your finances in a better manner. Budgeting is the easiest thing to do, but actually adhering to it is another story. Many of us have tried and failed miserably. But, like anything in life having a goal, an end to achieve makes the journey possible. You can start by making small changes like cutting off cable, traveling by local transport or carpooling to save gas, not enrolling your kids to fancy schools you cannot afford, cooking more at home and eating out less, are few suggestions that have helped me immensely. You will be surprised as you make a list of your expenses, of how much we spend on eating out. I could have bought a fancy car by now.

Step 3: Stay away from Debt

As far as possible live within your means. Being in huge debts that you can probably never pay-off maybe more of a western thing. I know people who have good salaries borrowing money at the end of the month, from their friends to get basic food supplies like milk, bread etc. It astonished me. On confronting, my friend said that their salary mostly was spent off on paying for EMI’s on things they couldn’t afford in the first place.

So my advice to those who are already in debt is to pay off your loans as soon as possible. The large screen TV, expensive cars, the fascination with MacBooks or iPhones that really cannot justify your income, should be paid off first. The next step is to stay away from buying anything that you cannot afford, no matter what. Stay sober for a few years to regain your financial stability.

Step 4: Save Save Save!

I have realized a little too late in my life that the only way to succeed in being financially stable is to save. I was not well informed and hence just let my money rot in the bank. When I saw a large amount reflect in my passbook, I thought it’s my moral duty to spend it on myself. Come on now after all I deserved it right? I worked for it. If you are like me, the first thing you should do is immediately keep aside 10% of your earnings and invest it.

There are many investment options out there. It is like picking your wedding dress, you won’t pick up the first one you see unless you are me (yes, I actually did that). Pick up an investment tool or a saving mechanism that works for you. Since I do not understand markets too well and as one who started her career in recession  (2008), I am afraid of its volatility. Hence, I tend to go for safe investments where the risks are lower, although the rewards are low too. I started a separate account to manage my investments, as this way, I will be able to see what is happening to the 10% of my savings each month and how they have grown over the years. Usually, the banking personnel will help you to invest, but the safest is long-term, less-risk mutual funds, Public Provident Fund, and Fixed Deposits. For me, the fixed deposits are my emergency money. I put aside a fairly large amount in it and basically forget about it. It renews itself each year, the returns are miserable about 7%, but this is not to grow my money, but meet my financial emergencies. And no, going abroad for your anniversary is not an emergency.

I want to encourage you to start saving young. Remember, this is what is going to take you through your retirement years. Hence, being financially stable while you are young and allowing your money to grow through investments when you cannot work anymore is an ideal situation to be in.

In conclusion, financial stability is for everyone. As we know “ a penny saved is a penny earned”, there is much wisdom in those words. So to sum it up –  Track your expenses, determine your life goals, budget your expenses and most importantly save 10% of all your income. Also, be patient. Your money won’t grow in a year or two, it takes a long time to see progress. But all said and done, these four steps will go a long way to help you attain the financial stability that you once thought was only a fairytale.

You may also want to read other article written by the same author ‘Career tracking while on a career break‘, ‘Career restarting for a woman on a career break‘, ‘Is returnship right for you?, ‘Five things to consider before a career break‘, ‘5 reasons why working moms are highly productive‘, ‘4 Questions to know yourself better and find a suitable career path‘, ‘5 most frequent challenges that women entrepreneurs face‘ .

About the author:

The first time Susan Kutar (Tamang) realized that words could touch lives, she wanted to be a writer and blogger. She has 7 years of experience in Human Resources and Talent Acquisition. She likes to write about topics that impact people, which is educational and leaves the reader with something to mull over.

(The author is a guest blogger at Her Second Innings. The opinions expressed are those of the author.)

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“This blog claims no credit for any images or content posted on this site unless otherwise noted. Images and content on this blog belong to their respective owners. If there is an image or content on this blog that belongs to you and you do not wish for it to appear on this site, please e-mail us with a link to said image or content and it will be promptly removed.”