It is but human nature to possess things. We all desire beautiful homes, luxury cars, latest smart-phones, large-screen TVs, designer clothes and much more.
Nothing wrong with it!
The question, however, is how you finance it.
There are primarily two ways to do so:
(a) Either you buy them with your own money
(b) Or, use borrowed money.
Needless to mention, the best policy is to use your own money.
Here, your first reaction would be... 'Oh, but I don't have sufficient cash'.
I beg to differ:
Except probably a house, which requires a huge outlay, most of the other desires could easily be managed with one’s own money.
And, the problem of shortage of cash is not your "insufficient" incomes, but rather the "extravagant" expenses. You would be most surprised by the amount of "extra cash" you can possibly squeeze out, by just being a little more watchful with your spending.
For example, instead of replacing anything broken or torn, think of repair, recycle or reuse (by the way, this is also environment friendly). There is always a room to slash your monthly phone, internet, electricity and cable bills. Go for more home-cooked food rather than often eating out. Join a library instead of buying books. Walk, instead of using a car, if distances are comfortable. This saves on gas and your medical bills too. Plan your trips in advance, to avail huge discounts on hotel rooms and flights. The list is infinite. I can go on and on.
Try it! At least, once!
Change the formula from:
Income - Expenses = Savings
To
Income - Savings = Expenses
I guarantee that this one change will transform your life, forever.
Besides, you can invest this extra cash to get extra returns. Don't let the money rot in your bank account. Put it someplace where you can earn better returns.
Not only would buying things from own money be lot more pleasurable, but also a giant step towards stress-free financial life. Don't you think you owe it to your family?
As I had once remarked "If your friends determine your worth by the type of phone you own, it is time to get better friends, not better phones."
Do you know how to turn your net worth positive and multiply it?
So that's Step 1 towards Financial Freedom...
... Be a Smart Buyer. Spend your own money and don't overspend.
But, what if you are constrained to borrow?
No problem; provided you are cautious about three things:
1. What you borrow for?
Owning a house would save you rent. Besides, it also appreciates in value. So borrowing for a house is not a bad idea. Additional qualifications may enhance your earning potential. So, education loan is not a bad idea. But borrowing money for a smart-phone or designer dress is indeed an atrocious decision. Not only they earn no money, but their value also depreciates rapidly.
In short, go for loan only if it really (really) matters. Never ever borrow money to buy luxuries. That's the fastest way to financial doom.
2. What amount you borrow?
Your loan amounts should be limited by your capacity to repay. If you are planning big-ticket purchases, such as a home, you could probably earmark 45 to 50% of your take-home monthly income, towards loan repayment. But for smaller items such as computer or a refrigerator, make sure that at most 10-20% of your monthly income goes towards paying the loan installments.
3. What cost you pay?
Finally, of course, interest rate matters, a lot.
Credit cards are the most expensive (and often disastrous). Secured borrowings are the cheapest. And, personal loans fall somewhere in between. As such, focus on loans backed by a security, so that your interest payout is the minimum. Be extremely choosy and stingy with personal loans. Credit card borrowing is a strict no. Go for them only in cases of extreme emergency; besides ensuring that the outstanding balance is brought to zero as early as possible.
In a nutshell: The lesser money you owe to others, the stronger is the foundation of your financial future. It is very easy to put your future (and your family’s too) in danger...
... by being lured by availability of easy money
... by having things that you don't really own
... by trying to keep up with Joneses in your neighborhood.
That's Step 2 towards Financial Freedom...
... Be a Smart Borrower. Borrow for necessities. Borrow limited money. Pay the minimum possible cost.
Concluding, your financial destiny is in your hands. True happiness comes not from how much you have, but by how much of it you can truly call as your own.
Nothing wrong with it!
The question, however, is how you finance it.
There are primarily two ways to do so:
(a) Either you buy them with your own money
(b) Or, use borrowed money.
Needless to mention, the best policy is to use your own money.
Here, your first reaction would be... 'Oh, but I don't have sufficient cash'.
I beg to differ:
Except probably a house, which requires a huge outlay, most of the other desires could easily be managed with one’s own money.
And, the problem of shortage of cash is not your "insufficient" incomes, but rather the "extravagant" expenses. You would be most surprised by the amount of "extra cash" you can possibly squeeze out, by just being a little more watchful with your spending.
For example, instead of replacing anything broken or torn, think of repair, recycle or reuse (by the way, this is also environment friendly). There is always a room to slash your monthly phone, internet, electricity and cable bills. Go for more home-cooked food rather than often eating out. Join a library instead of buying books. Walk, instead of using a car, if distances are comfortable. This saves on gas and your medical bills too. Plan your trips in advance, to avail huge discounts on hotel rooms and flights. The list is infinite. I can go on and on.
Try it! At least, once!
Change the formula from:
Income - Expenses = Savings
To
Income - Savings = Expenses
I guarantee that this one change will transform your life, forever.
 |
| The unbelievably simple secret of achieving true financial freedom. |
Besides, you can invest this extra cash to get extra returns. Don't let the money rot in your bank account. Put it someplace where you can earn better returns.
Not only would buying things from own money be lot more pleasurable, but also a giant step towards stress-free financial life. Don't you think you owe it to your family?
As I had once remarked "If your friends determine your worth by the type of phone you own, it is time to get better friends, not better phones."
Do you know how to turn your net worth positive and multiply it?
So that's Step 1 towards Financial Freedom...
... Be a Smart Buyer. Spend your own money and don't overspend.
But, what if you are constrained to borrow?
No problem; provided you are cautious about three things:
1. What you borrow for?
Owning a house would save you rent. Besides, it also appreciates in value. So borrowing for a house is not a bad idea. Additional qualifications may enhance your earning potential. So, education loan is not a bad idea. But borrowing money for a smart-phone or designer dress is indeed an atrocious decision. Not only they earn no money, but their value also depreciates rapidly.
In short, go for loan only if it really (really) matters. Never ever borrow money to buy luxuries. That's the fastest way to financial doom.
2. What amount you borrow?
Your loan amounts should be limited by your capacity to repay. If you are planning big-ticket purchases, such as a home, you could probably earmark 45 to 50% of your take-home monthly income, towards loan repayment. But for smaller items such as computer or a refrigerator, make sure that at most 10-20% of your monthly income goes towards paying the loan installments.
3. What cost you pay?
Finally, of course, interest rate matters, a lot.
Credit cards are the most expensive (and often disastrous). Secured borrowings are the cheapest. And, personal loans fall somewhere in between. As such, focus on loans backed by a security, so that your interest payout is the minimum. Be extremely choosy and stingy with personal loans. Credit card borrowing is a strict no. Go for them only in cases of extreme emergency; besides ensuring that the outstanding balance is brought to zero as early as possible.
In a nutshell: The lesser money you owe to others, the stronger is the foundation of your financial future. It is very easy to put your future (and your family’s too) in danger...
... by being lured by availability of easy money
... by having things that you don't really own
... by trying to keep up with Joneses in your neighborhood.
That's Step 2 towards Financial Freedom...
... Be a Smart Borrower. Borrow for necessities. Borrow limited money. Pay the minimum possible cost.
Concluding, your financial destiny is in your hands. True happiness comes not from how much you have, but by how much of it you can truly call as your own.
