Regardless of how much you earn, people who are not managing their money well tend to do one of the following common mistakes:
– you spend more than your income which leads to accumulating debt
– you spend all that you earn and live from paycheck to paycheck
– you only managed to save a tiny percentage of your income (under 10%)
While it is true that your maximum savings potential increases greatly once you have a high income, the same cannot be said for regular savings consistency. There are just as many people who have six figure incomes making the above mistakes as compared to people with low income. Higher earners are also prone to having no savings and accumulating debt due to poor personal financial literacy, such as misusing long term unsecured loans for bad credit.
If you are making $50,000 per year and having no savings, the best short term solution is to examine your monthly spending. This is easier compared to taking a second job or asking for a pay increment. It is just a matter of getting used to spending less and living frugally for your own good. Many people earn less than $50,000 annually, but they can still buy a house for low income and support their families so this is definitely possible.
Best Way To Accumulate Wealth
Once you know where your money is spent, you can find ways to cut down on unnecessary spending habits and save more. There is no secret ways to get rich and most people accumulate wealth slowly through this boring but high probability method successfully. For a start, try to balance your checking account every month. There are some big banks which provide checking accounts with no ChexSystem if you have problem signing up due to big credit.
The most common reason why people cannot accomplish their financial goals is because they overspend and live beyond their means, fueled by the availability of easy personal credit. Credit cards not only encourage overspending leaving you with no money for savings and investments, the high interest payments also take away money from your future earnings. If you already carry a month to month balance on your credit card, the only way you can become debt free fast to cut your overspending right now.
Many people earn barely enough to make ends meet for themselves and their family. If your spending cannot be further reduced, then you need to try and increase your income. Otherwise, it is easy to start falling into debts through borrowing money for consumption.
How To Use Credit Cards For Free Loans
Smart people who are savvy with their money make full advantage of their credit cards without letting the banks earn a single cent from them. Interested in joining these elite group and beat the banks at their own game? Simply pay your bills in full every month, and let the banks lend you money for free to pay for your monthly purchases. Using your credit cards this way is equivalent to a convenient way of buying things with interest free short term loans. The catch is that you must not carry any balance or the grace period may be removed and the banks win by charging a high interest rate on any debts you carry over month to month.
The real danger of credit cards comes from the ease of living momentarily beyond your means and spending money you do not have yet. If you keep making only the minimum monthly payments, it becomes harder to pay off your credit card debts completely. Doing so will only cover the interest fees without paying down the debt principal. You can end up paying for high interest credit card debts for many years.
If you are single and trying to save money, the best way is to cut down on your social and recreational activities. If you limit your outings to twice per month, you will find yourself with more money for savings. You just have to accept the fact that your friends may have more money than you do, but you should never try to fit into their rich lifestyles at the expense of running up personal debts fast.
How To Save Money For Young Adults
For young working adults, most will not choose to forgo the latest Apple iPad2 or gadgets because saving for retirement or a home purchase is more important; maybe they will do so for a car loan down payment, but never for a house! this is the general mindset that is affecting our youths and they do not realize over consuming is the reason why long term expenditures are not prepared for and they end up not being able to retire early.
If you do not want to feel guilty for careless spending in future, control your emotions and temptations now. Setting some simple savings goals will help you stick to the plan and avoid your spending habits from being driven by desires and goading of friends. Stress from work or other aspects of life can drive many adults to overspend in order to feel good. Such satisfaction is usually temporary and buyer remorse kicks in once the credit card bill arrives. The more you spend, the less you save and the longer you have to continue working in a demoralizing job in order to keep up with your spending habits.
Shopaholics are people who become addicted the psychological highs they experience from spending freely. Researchers have identified several reasons why some people are more prone to spending addiction, as well as treatments for such cases. If you feel that spending and debt problems are chronic, it is better to seek medical advice immediately for how to stop overspending and start regular savings.