One reason you might have financial problems if you’re earning a good salary is that you’re trying to live more like your friends.
Perhaps you spend more money on entertainment costs than you’d like, buying such things as soft drinks, beverages, fast food, and movies. While these small expenses are often harmless in themselves, they can be problematic if they’re frequent enough to reduce the amount of money you have available to pay for more essential goods or services, like groceries, gas money, or the phone bill.
Things can get even worse if your friends overspend on high-ticket items, too. Perhaps they like to live in expensive apartment complexes, go on great vacations, buy the latest tech gadgets, and get the newest model of cars. Even if you can keep up, spending money on depreciating assets will reduce your ability to save and invest.
Another reason you might have financial problems is addictive spending. Psychologist Dr. Vince Berger, an addiction specialist, estimates that there are more than 14 million shopaholics in the United States and the nation’s credit card debt exceeds $600 billion.
If you’re spiraling into debt, here are some steps you can take to turn things around for the better:
Find an Effective Debt Repayment Method
If you’re paying out more to cover high-interest fees than you’re paying on the principal of your outstanding credit card balance, it might be worth setting an appointment with a debt repair consultant from Polo Funding to see if you should get a consolidation loan as a way to get out of debt.
However, repaying your debts through a structured debt repayment method will only work if you change your spending habits and stop spending at the same rapid rate you did before you got a loan to merge all your credit card payments.
Improving your financial literacy will help you understand how to go about building your wealth by using practical concepts like budgeting to control your income and expenses, savings to leverage the power of compound interest, and investing to put your money to work for you.
One approach to improving your financial literacy is to find a few good online resources on personal finance, such as YouTube channels, podcasts, and blogs.
Another approach is to take a personal finance course or buy a book on money management and treat it like a course, breaking down the core concepts into assignments that you can set for yourself. For instance, one assignment might be to spend a week learning how to budget effectively. Then, the next assignment might be how to set up a savings schedule.
Improving your financial literacy will put your feet on the road to wealth.
The Road to Wealth
We often associate building wealth with earning more, but this is only part of the formula. If you are earning a high salary but paying high expenses to enjoy a lavish lifestyle, then you are not getting wealthier—you’re just fabricating the illusion of financial success.
The other part of the wealth-building formula is to get better at managing your money. If you’re spending more than you’re earning, then you’re leaning toward poverty. If you’re spending as much as you’re earning, then you’re breaking even. And if you’re spending less than you’re earning, then you’re moving toward wealth.
Once you’re on the road to wealth, protect it by repaying all your debts and managing your money well. Also, get enough insurance coverage to protect your property. Paying high premiums for excellent insurance coverage is not a waste of money compared to the cost of dealing with damage or theft.
Create a Positive Money Mindset
The only way you can change any problem in your life is to first admit that you have a problem. If, for instance, you’re spending more money than you’re earning–perhaps because of your friends or because of addictive spending habits—then you need to take some remedial steps to correct your course. Instead of leaning toward poverty, point yourself toward wealth.