Does Making Big Money Make You Rich?
Financial security is of paramount importance in our lives. There can be no doubt about the fact that we work to the best of our capacities to ensure that the ‘money’ factor doesn’t loom large on our day-to-day living. But the question is if you earn big money, does that make you rich? Most people agree that the place where we live determines to a large extent whether we are rich or not. Let’s delve into this further.
What Is Meant By Being Rich?
Let’s assume a person is living in a place called XYZ and XYZ is known for its high standard of living. The person will any day feel his or her income should be higher than another moderate-income zone (let’s assume this moderate-income zone’s name is ABC). XYZ necessitates that the salary the person earns should be higher, given the high prices of even the basic amenities. On the other hand, ABC can also lead to a point where the person might have an even lesser disposable income if he or she prefers to settle down in that zone since the expenses are less and the mode of living is cheaper.
Theoretically, the person who has a handsome salary and can afford XYZ is termed ‘wealthy’ in terms of his income and lifestyle. But if we examine carefully, his savings potential at the end of each month is lesser than someone living in ABC. Hence, earning big money doesn’t mean you will be always on the easy streets. It depends on where you live, your recurring and basic expenses every month, and how much you can save or invest at the end of the month.
What Causes Money Drain?
Besides factors like the place of stay and expenses, other issues could also drain you of your wealth.
a. House/car (and sometimes loans for these): Investing in ‘large’ houses and cars might be something everybody wants, but these big expenses might cause a big dent in your savings. Many Americans struggle to make ends meet, just because acting ‘modest’ with the size, having foresight about payments, and insurance didn’t occur to them.
b. Debt: Debt obligations are all about paying high-interest rates and not saving that money for personal use or growth. Despite making a great income, a lot simply goes away into debt repayment.
c. Kids and Pets: The latter can certainly be called an add-on, but as regards the former is concerned, careful planning for your kid’s future is imperative. You may have to spend a lion’s share of your monthly earnings on your kids and pets and for good reasons, but you should at least act wisely with the money so that you don’t end up splurging on things that neither you nor your tiny tots need.
How To Improve Your Finance?
As per the National CPA Financial Literacy Commission, you can apply these tricks to improve your personal finance (and probably, your credit score).
a. Having control over daily expenses: Being money-wise is taking full control over your expenses. Check to see what you can exclude and have an obvious strategy. This way, you can figure out what to do with your hard-earned money.
b. Get rid of the debt: From student loans to vehicle and house loans, try to repay the high-interest debts first. If that’s taken care of well, you will be surprised at how you can manage the situation effectively and cause less stress to yourself and those around you.
Start Planning For Retirement
Future planning entails planning for retirement too. Take small steps initially and check how you can utilize the auto-debit feature to start saving every month. Alternatively, you can start contributing to plans and schemes meant specifically for the purpose. Make sure you invest in good health insurance plans and try to find affordable health care facilities around you. There are emergency funds and even Health Savings Accounts which you can opt for.
Earning big money is just one of the preconditions for getting rich. However, it all comes down to what you are left with at the end of the month and how well you utilize your money to safeguard your future as well as how well you can keep your expenses under check. Balance is the key here.
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