Let's look at the things that affect you and your Personal Finances:
Like most normal people, you've got a job and you go to work every day. At the end of every week(s) or month you get a paycheck and the first thing you notice is that the amount is lower than the gross income. What happened?
You have tax deductions. The government has already taken its share in form of income tax and other statutory deductions such as social security and health insurance funds. Zap!It's gone! You never even get to see or touch it.
What happens next... You have basic personal expenses...rent, utility bills, groceries, regular car maintenance, entertainment, home repairs, medical bills...you name it!. If you do not manage your personal finances through a budget, you have no means to track where your money is going, you sooner realize you have nothing in the middle of the month and some expenses are still unpaid. No idea where the money went. Parkinson's Law states "Expenses always rise to meet income". So, if you do not work-out your income and expenses through a personal budget, not only will your expenses rise to meet your income, but also exceed it.
Okay... Let's say your income manages to survive and you have some balance after covering your personal expenses. What's next?...Your desires. All humans have desires, some more than others. You might desire a new car, bigger home, a new home theatre system, a vacation in an exotic place, your daily evening drink with friends and workmates, a new set of clothes, a new phone, a new jewelry, gifts for your loved ones, a membership to a new social club, throw a big house-warming party in your new home...the list is endless. Perhaps you give in to one or more of your desires and you manage to pay for them from your balance. If you can't pay for them all, you have to get some on credit.
Eventually, debt comes to the scene. Debt comes in when your expenditures exceed your income sources. In such a situation, most folks would solve their everyday cashflow problems with a credit card or a loan from a friend or a shylock, and if they would desire to purchase big ticket items such as a car or a house, they would go for formal loans such as auto loans or mortgages. Buying stuff on credit isn't bad. However, the problem arises when your debt exceeds beyond the amount recommended by financial planners and you are unable to service it.
Last but not least, you come face to face with unexpected problems. I mean emergencies. Stuff you never anticipated. Your car breaks down, you lose your job, you have been diagnosed with a terminal illness (God forbid), and your roof is blown off by a hurricane or thieves break into your house and steal your valuables. Such emergencies do have a great impact on your personal finances especially if you had not considered risk management in your personal financial planning.
Now...let's say your income is doubled, would the increase improve your life or change the way you handled your personal finances? Nope! ... I don't think so. Infact, it is likely that you will feel an irresistible urge to increase your personal expenses at the same time and end up with more debts.
Anyway, Relax!... You are not alone. It's likely that if most people were told their income would double in three months, 99% of them would begin increasing their personal expenditures immediately, in expectancy of the doubled income. They would immediately move to bigger homes, drive a fancy cars, buy more stuff, and so on until their expenditures become greater than their income again.
Without doubt, earning more income is not going to solve this problem, because we seem to have a natural inclination towards spending what we earn in the same way that we eat everything on our plate. The Parkinson's Law, you remember?
So now, what's the way forward? The answer is....a big mental change that involves:
The rest on this site shows you how to start your financial journey in very simple terms.
Welcome! and enjoy the Journey.