Have you recently got an increment in your salary? But at the same time, are you stumped by the fact that you are saving less than before?
It indicates a severe issue with your finances that need to be corrected. This has become common with many as they cannot increase their savings with the scaling income. However, one can fix this by evolving their finances accordingly.
Here, it becomes crucial to know the reasons leading to this situation.
We list down some of those reasons that can contribute to this situation.
Living beyond Means
Everyone aspires for a better quality of life, but this doesn’t mean that one will start spending beyond their means. To live a financially balanced life, one must focus on savings and investment.
Naturally, our wants increase as our income scales up but having control over these tones for our financial future.
Spending more from Credit Card
As the income scales up, so does the access to powerful financial tools. This includes a higher credit card and increased eligibility for different loan amounts.
All this feels tempting, and people start spending more on their credit cards. Some even go for personal loans for big purchases or gadget updates. But, when you get access to such financial tools, it is essential to use them wisely. This is because- be it the credit card or personal loan, the interest charged on these are high, ranging from 16 to 32% for credit cards and 10 to 16% for the personal loan.
So, before you use them, think twice and constantly analyze your repayment capacity and affordability.
Investment is Ignored
Investment is the key to a healthy & secure financial future. But, this is often ignored by the majority of people. Generally, youngsters find it boring and think it’s just the start of their financial life and invest later.
But it’s a fact that just saving money in your bank account is not enough to live a secure financial life. Investing money not only puts your hard-earned money in the right place but also secures your future. Investment in mutual funds, stocks, shares, IPO, etc., is a few great ways to increase your wealth.
Not Tracking the Spends
The key to a secure financial future also lies in tracking your expenses. Knowing where your money is going helps you analyze your finances. To do this, you can analyze your bank statement and credit card statement. Maintain a spreadsheet of your expenses and keep track of it. Doing this will help track your finances and to achieve financial freedom.
Going for loans unnecessarily
Loans are financial tools that can prove to be quite helpful in emergencies. But, it’s a fact that loans come with a commitment that needs to be fulfilled for a long time. So, availing it only when necessary is the wise thing. Loans like personal loans come with tempting offers and are readily available with any bank. But for balanced finances, it is vital to go for this loan only after doing a proper calculation. Using EMI calculators before availing of the loan will help you know your EMI and plan your finances accordingly. Moreover, before you go for a loan, knowing how necessary it is to borrow money is. And avoid it until it’s not required.
As the income increases, so do our dreams for a better life. However, it’s only up to us whether we want temporary happiness or a sure future. Remember controlling our desires and proper financial management strategies can be the keys to a secure lot.