How easy was it for you to afford breakfast this morning and what did you take for breakfast? If you woke up and did not know where to find money to buy bread, milk and sugar, then you are struggling financially. If you woke up and did not know where to go for your breakfast or what to eat, then you are comfortable financially.
It is easy to spot an individual who is struggling and a person who is financially very comfortable because you will see the choice they make in regards to their expenses. The residential address they hail from is a big indicator too. If you live on the east side of most cities, then you are not in the affluent group. Most people who are comfortable hail from the west side of most cities.
In this article, we look at how to improve our current financial situation. There are five types of current financial situations;
This refers to a situation of need or poverty in extreme situations. It refers to that point where basic necessities are hard to come by. Individuals in this state struggle to find food, shelter and clothing.
Clean water and air are a luxury because their residential addresses usually do not provide or allow for such.
It is that situation where children’s education is a luxury and manual jobs is the only means to survive. In countries like the US, these individuals are placed on food stamps to help them get by while in the developing world where there is little government support, these individuals are left to their own devises, sometimes starvation.
In Africa people struggling financially live mostly in slum areas where basic amenities like roads and sanitation are lacking. In worst cases, sanitation is by means of flying toilets where someone uses a polythene bag in their single room to relieve themselves then throw this out, sometimes onto the polythene or iron roof of their neighbor.
It is a dire situation to be in and all effort should be made to move out of this group.
Maintaining is a situation where one’s income is not sufficient to cater for all of a person needs but at least you can afford basics such as food, water, shelter and sanitation.
People in this group find it difficult to save or cater for future needs such as the education of their children, medical emergencies and mild natural disasters such as excessive rains and or crop failures. You rely on others when emergencies arise.
Retirement is always a worry on your minds because you do not have savings for retirement.
In this group, the major need is education and if well done, these you can rise and become comfortable.
- Just Comfortable
Just comfortable means you are living financially stress-free because you can pay all of your bills and also meet your savings goals.
Your consumption is distinct and as you make more money, you channel most of it into consumption such on an annual vacation, wardrobe additions, joining a fitness center, going to dinner and a movie and getting a new car every few years.
You start to hang with others who make larger salaries, spending more money on things you want, but don’t necessarily need. This might include putting in granite countertops in your kitchen, getting leather seats for your living room and buying a more expensive car.
Vacations to the coast or out of the country is a possibility and you spend more on clothes.
These expenses aren’t necessarily extravagant but you need to budget for them. Thankfully you’re able to make these purchases without stressing about going deeper into debt.
This is the class commonly called upper middle class and it is worth noting that life here is decent.
- Very Comfortable
The affluent live in this zone.
This is where money is not really an issue, what to do with it is the problem.
Most individuals in this zone have many sources of income, understand investing in complex assets such as derivatives and financial markets.
They own big companies and use extreme means such as choppers and jets to get around. They are usually global investors.
Expenses for this group include custom made cloths, sports and holidaying machines such as yachts as well overseas holiday homes.
How to achieve a comfortable financial situation.
A comfortable lifestyle can be achieved by financial planning.
The major aim of financial planning is to become financially independent and move to a comfortable lifestyle.
Even if you’re fresh out of college and don’t feel a need to start your retirement fund, planning on when you’re going to do that will help you control your costs and spend your money wisely now. Meet with a financial planner and discuss a long-term plan that includes the following: retirement accounts, life insurance, house down payment, investments, college fund and tax planning.
Credit is a major stress and Financial Matters offers comprehensive financial planning for individuals. Click here to book a complimentary session.
In its truest sense, financial independence means you can pay all of your bills without loans, mid month advances, family money or overwhelming credit card debt.
Early in your life, this might mean being able to pay your living expenses, but not necessarily setting aside savings. While you won’t rely on your folks to help you, you know they’re there in an emergency. Credit cards can help you temporarily pick up slack, but you can pay them off each year. As you age, you’ll not only need to pay your monthly bills, but you’ll also need or want to address how to fund your retirement, set aside cash for emergencies, save for a house down payment, help your children with college costs, supplement your health insurance and perhaps carry life insurance.
Financial freedom starts with a personal budget. It’s easy to create a budget. Use a simple spreadsheet and list your recurring monthly expenses.
List one-time or semi-regular expenses such as health, car and home insurance premiums, holiday and vacations and divide them by 12 to get the monthly average.
List your income sources and average them per month. Always note how many incomes you have and find out if you can create more sources.
Subtract your average monthly expenses from your average monthly income to determine if you need to cut your expenses to become financially independent.
Create a cash flow statement that shows the exact dates you’ll need to pay each bill, rather than using averages. Insert your income into this document based on when it arrives, rather than when it’s earned. This will help you keep enough cash on hand to pay semi-regular bills, such as quarterly insurance premiums, without having to call on sponsors.
Knowing how to budget as your needs change throughout your life will help you achieve your personal financial goals.
A comfortable lifestyle is a minimum that every human being should achieve and you must do whatever is in your powers to achieve it. Start with a budget.