Does
high income means Financial Security
Do
you always struggle to pay your bills towards the end of the month despite
earning decent money? If yes, then you need to keep a check on your spending
habits. It's a common notion that higher income is the key to one's financial
success. Many of us believe that jobs paying lucrative packages and providing
thriving opportunities are a pre-requisite to secure our financial future. But
we often forget that money doesn't beget money on its own; it's us who can make
money work for us. We need to understand what
may spoil your financial future despite of you earning high
income.
What
should you be careful of?
·
Excessive
spending would leave lesser amount in your hands for
investment
·
Excessive
debt would always eat into your earnings eroding your
surplus
·
Poor
utilisation of your surplus may reduce your chances of earning attractive
returns on your investments
High
income and lesser responsibilities may entice people to spend excessively on
their lifestyle related expenses and splurge money on recreation without even
giving a second thought. One might be getting a good hike in income every year;
but may pile up huge debt being extra-optimistic about future rise in income.
Some may have lesser debt but ineffective investment plans may still
generate lower returns on their investments. This may eventually lower your
chances of generating wealth that you may otherwise have generating have had you
invest in winning investment propositions.
What
should you do to make your money work for you?
·
Avoid
impulsive buying
·
Plan
and monitor monthly expenses
·
Make
effective use of credit cards
·
Avoid
excessive borrowing
·
Make
a list of your goals
·
Forecast
amount you need to achieve your goals
·
Prepare
an effective investment plan
·
Monitor
and revisit your plan at regular intervals to make it more
effective
Many
of us spend first and invest later but it should rather be the other way round.
You should spend on your lifestyle and other recreation activities only after
investing an ascertained amount every month. Habit of investing systematically
helps you grow your investments which can be utilised for achieving your goals
in future. It is important to estimate amount you may require to achieve your
goals in future. You should try to first predict as to how much money you may
need if a particular goal was to be satisfied today.
Using
appropriate rate of inflation you may arrive at the amount you might require in
future to satisfy the same life goal. For Example, if you have 15 years left in
your retirement; you must first forecast how much money you may need every month
post- retirement if you were to retire today and try to estimate how much money
you would need every month after you hang up your boots. For planning your
finances you might take professional help. Once the amount needed for
fulfillment of goal(s) is ascertained you may chalk out a suitable investment
plan. You must know your risk appetite before investing in any asset. Right
asset allocation and timely monitoring is the most important part of any
investment plan.
Drop us an email and help us re-work your finances for a secure financial future.
michaelpduarte@hotmail.com
