5 Factors that Affect Your Financial Future
The concept of financial independence, might be understood by some but not the majority of the population.
Even understanding the concept, most people find it difficult to earn and save enough to retire quickly and start living that comfortable life that they envision.
Here are five factors that can significantly impact the nature of your financial future.
1. How Much You Earn Matters
Never depend on a single paycheck. Creating more sources of income is a more effective path for a better financial future. Your goal should be to reach a point where you no longer fear the loss of a full-time role.
It’s all about how wisely you spend your earnings.
Are you a shopaholic?
Or are you just an impulsive buyer?
Either way, you should learn how to control your spending.
Use our soon-to-be-released app, Trifigo, to track your income and expenses. If you can see that you tend to spend more than you earn, create a budget. Check in to make sure you don’t exceed it.
Never spend more than you earn. And never stay in debt for longer than necessary. If possible try to pay down high interest debt before saving a significant portion of your income. Trying to save while you’re still in debt is not as effective as you will still be paying interest for the money that you owe somebody else. The interest that you pay for your debts will be higher than the interest you gain from your savings.
Although developing the habit of saving is good, getting out of debt is even better.
3. Savings and Investments
Why should you save?
You should have a clear target. Don’t save for the sake of saving. If you don’t have one, you can seek some guidance on this to help you identify your goals.
First and foremost, you should set up an emergency fund. Then you can start saving for the future in order to gain financial independence. Someday, you’d be able to safely say that you have reached financial independence when you no longer have to work every day to live a happy and comfortable life.
4. Emergencies and Risk Management
An emergency fund is critical for your financial well-being in the future. From losing your job to looking after your troubled cousin who suddenly turned up at your door, you should be ready for whatever emergency that might turn up out of the blue. Experts recommend that you save up money that covers up to six months of living expenses. Having an emergency fund will lead you to have enough money in case of a financial emergency. It will keep you away from resorting to the use of credit cards or predatory lenders.
5. Living Within Your Means
What exactly does it mean to live within your means?
It means spending less than what you earn each month.
Many people struggle to stay within this limit as they find that they have to pay a never-ending list of bills each month. And many tend to “forget” about this limit as they spend uncontrollably using credit cards, loans and even emergency funds they have put together, without thinking twice.
If you want to make a large purchase, it’s always advisable to set aside some money every month until you save enough to buy that item or even a vacation using cash.
If you don’t feel like putting aside money to save up, then surely you can’t afford to make large purchases, even a house usually requires some of your own money.
Needless to say, there certainly are many other factors that can affect your financial future. But these are a few of them on which you can exercise a certain amount of control.
Finding the right balance between earning and spending is difficult.
But for those who want something better in their lives, there are ways to come around these obstacles.
Plan wisely. Stick to those plans and rise above these obstacles for a better financial future.
If you like what you have read, please share with your friends and family and let’s keep empowering everyone to take control of their credit and finances.
App coming soon. Please subscribe to stay in the loop with our gems and other featured articles.