4 Factors Which Dictate Your Spending, and How to Use Them Well |
Posted: December 26, 2015 |
There are many factors responsible for our financial behaviours. They determine our standards of living in terms of how much money we can spend at a particular time, how much money we can hold and what to do with our money in future. Every individual, irrespective of his socio-economic class, is limited by these factors in a way, and is therefore obliged to adjust accordingly to be able to remain active economically. What are these factors, and how can you make them work for you in the next fiscal year? Here’s a list of 4 such factors, supported by actionable ways of using them to your advantage come 2016. 1. Level of income There’s no doubt that your level of income directly influences your personal expenditure. What you earn from your current job is your primary source of income, and it dictates you spending behaviour. If you work in a company where you earn a fixed amount of salary, you should seek other means of making more money. You should device a means of generating side income in order to meet up with your growing needs. However, if you’re an entrepreneur, you can grow your income by reinvesting in other businesses, expanding your network, automating your business processes, or by outsourcing. Blogging for instance is an exercise that can be refreshing and financially rewarding. You may consider doing it on the side if you have the interest and skills. Here's a simple guide on getting started with blogging. 2. Interest rate Interest rates also affect personal expenditures since they’re not fixed. Generally, interest rates affect both investors and consumers in a variety of ways, from simple bank savings accounts to home mortgages. Usually, the best time to save money is when interest rates are high, but at this period, the cost of borrowing will go up. On the other hand, the best time to borrow money is when interest rates are low. It’s also a good time to refinance your mortgage. Early this year, many people took loans in San Diego to refinance their mortgage since the interest rate was at an all-time low. I benefitted from it too, but now that there are speculations that higher interest rates are on the way at some point in early 2016, I really can’t stick out my neck. 3. Savings Having a savings gives you a certain degree of freedom with your expenditure. It allows you to reach your financial goals, and also takes care of your unexpected expenses. Apart from serving emergency purposes, a savings can be used to fund children education, buy a car, make down payment for mortgage, or simply start a business. There are many benefits involved in saving money. It’s less stressful, it makes you happier, it helps you live a healthier life, it makes you feel empowered, and it gives you a bit of control and makes you financially independent. Therefore, saving is unarguably the wise option, and you should be making a lot of it going forward. It helps you and those dependent on you. 4. Lifestyle Lifestyle of an individual is also a major determinant in spending. In this regard, we can classify people into two groups according to their manners of spending: prudent spenders and reckless spenders. Prudent spenders are those who take into cognisance the end result of their spending activities. They spend within the confines of their earnings, and save for the rainy days. A friend recently joked that some people who undergo divorce without lawyers do so not only because of privacy but also because it saves them money. That's how to be prudent. But the reckless spenders do the contrary. If you’ve been living an ostentatious lifestyle prior to this time, you need to have a rethink. Spend with caution, increase your savings, and set financial goals that you can always stick to. This way, you’ll be able to make wise financial decisions that’ll improve your economic standing and add more value to your life.
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