Financial stability is the resistance of the financial system to shocks and its smooth and efficient functioning. As in most countries in the world, the central bank is responsible for ensuring financial stability.
The risks to financial stability that the financial system may face can be divided into external and internal. External risks may include, for example, a global economic crisis, deterioration of the foreign economic situation, a decrease in prices for important export goods for the country, and many others. Such phenomena, which are increasingly occurring in the modern world, as trade wars, the introduction of sanctions by some countries against others, disintegration processes. Internal risks include "bubbles" (or, in other words, "overheating") in individual markets, loss of stability by large financial institutions.
The Bank regularly monitors systemic risks (financial organizations, financial market infrastructure organizations, development institutions and the parallel banking system), assesses the stability of financial system entities, including through stress testing.
The main instrument for maintaining financial stability for the Bank is macroprudential policy, which is a set of measures to reduce systemic risk in the financial market or in its individual sectors.
Macroprudential instruments are used for two main purposes:
1. Reducing the vulnerability of the financial system (for example, caused by the growth of the debt burden of the population, weakening lending standards).
2. Accumulation of capital buffers by the financial system to cover possible future shocks.
Excessive spending, ill-considered investments are bad financial habits that are carried over throughout life. Dissatisfaction with one's own financial situation is passed on from parents to children.
Many complain about the lack of funds, blame the management, banks, the state. People always feel that the readiness for change must mature in themselves. To put your finances in order, it is enough to exclude spontaneous spending, learn to create reserve funds, invest wisely. Money should not become an end in itself, then there will never be enough of it.
A person with a regular income, decent savings easily survives temporary difficulties: breakdown of household appliances, delayed wages, moving. Financial stability is not wealth, but confidence in the future, the opening of new prospects.
It is impossible to achieve financial stability without planning. A plan helps to understand where to move, how to prioritize, create your own system of actions.
Financial instability is a person's financial state, in which their income is equal or approximately equal to their expenses. In a state of financial instability, a person, roughly speaking, spends as much as they earn, they have no reserves or savings.
Thus, the occurrence of any unforeseen situations immediately entails the emergence of debts and, as a consequence, a transition to a lower level - into a financial hole. That is, the word "instability" speaks for itself here. In this state, a person seems to have enough income to cover expenses, but at the same time there is nothing else left, so it is very shaky.
Judging by statistics and experience of communicating with different people, the overwhelming majority of the population of our country is in this state - financial instability.
1. Building a reserve
A person who spends all of their salary and saves nothing risks finding themselves on the brink of financial collapse. Large expenses, dismissal, sick leave, and debts will lead to bankruptcy. A reserve account in a bank, not necessarily a large one, will help you stay afloat in difficult situations. The reserve should be inviolable. The process of creating an account will help develop the habit of saving.
2. Paying off debts
First of all, you need to get rid of "bad" loans with a rate higher than 15% and credit card debts. If there are a lot of debt obligations, start with loans with a smaller balance.
3. Building savings
After paying off all debts, build up savings. Do not spend the money previously directed to loan payments, but accumulate it in a bank account. At the initial stage, the amount should be enough for 2-6 months of living without a salary. Savings should be 10-30% of monthly income.
4. Put aside 2-5% for retirement
Pension savings should be formed even if there are large debts. Accumulated funds can be invested at compound interest, invested in real estate.
5. Save, not take out loans
Once a financial security fund is created, it is necessary to set short-term and long-term goals (retirement). Plan to fulfill your desires without using loans: update your wardrobe, buy household appliances, go on a trip. Start by collecting funds for one goal.
6. Additional income
Find ways to increase your income, a second job, a hobby that brings in income, freelancing on weekends. Having additional sources of money changes your life dramatically (it will help you pay off your mortgage faster). At this stage, you should not plan a new business, as it will require large investments.
7. Invest in assets, make donations
When all reserve funds are formed, some short-term goals are achieved, you can move on to the stage of acquiring assets, engage in charity. This level of stability is a huge achievement.
The system of forming stability helps to develop financial discipline: the habit of saving, the ability to do without loans. In general, this is the achievement of confidence in the future. The plan can be adjusted taking into account individual goals.
Quite an informative article, many explanations on financial management issues that revealed the essence for full understanding. The article helped me and I hope it will be useful to others.
I often study articles on financial topics and here I found a lot of interesting information that turned out to be very useful. Some questions still remain unclear, but overall I rate the article positively.
Everything is written very concisely and clearly. The article helped me understand some issues related to finances and their management. I am waiting for the next issue of useful information.
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