In this blog article I want to share some thoughts of mine with regards to the choosing of one’s financial lifestyle as they increase their net worth.
These 3 categories of people and their financial lifestyle are of my personal observation. They have nothing to do with any person or incidence. Read it with an open mind and hopefully it will enlighten you to do something about your current financial lifestyle.
Category 1) The Borrowers
People in this category love Credit Cards. To them, credit card is the best invention since the internet. Their motto in life is “You only live once or YOLO”.
To them, paying cash is never in their mind. They want the convenience of life. They want the good things in life. They want the latest clothing, the latest iPhone, and the latest pair of Adidas etc. They just like to show-off to their peers of their “possessions”. Afterall, they reason they only live once, and they must make the best of it and “enjoy their life to the max”.
So, they keep on borrowing and using money that they have not earned. They are happy to pay the minimum payment required by the credit card issuers. 2% per month of credit card repayment is a walk in the park for them.
Not realizing they are digging their own financial grave. Not realizing they are building their lifestyle on quicksand.
If they do not change their lifestyle quickly, their “high-life” will end abruptly with a retrenchment, an illness, or an accident.
This is the time they will open their eyes and see their “possessions” repossessed. This is how they will end their financial lifestyle in most cases.
Category 2) The Spenders
The Spenders are different from the Borrowers as described in Category 1.
In this category, they are constantly thinking of things that they can buy with their take-home pay. If they do not max out their spending, they feel they are not doing justice to themselves. They reason they have worked hard and that they deserve their extra expenditures here and there.
Just some expenditures to pamper themselves and to compensate for their stress at work. As long as they do not overspend, next month, their salary will come to their bank account again. Why worry at all?
To them, “Can I afford the monthly instalment”? is the only question they have in their mind. If the answer is “Yes”, they will buy it immediately. No further question.
To them, their salary is like their Automatic Teller Machine (known as the “ATM”). So “don’t worry, be happy”.
Just like the Borrowers, Spenders live for today. To them, there is no tomorrows. Only today exists.
Just the Borrowers, a retrenchment, an accident, or an illness will cause them to be in a financial tailspin.
Category 3) The Money Keepers
When I use the term “Money Keeper”, I do not mean “hoarding”. There is a big difference. Please Google the difference for yourself.
As a Money Keeper, I mean this category of people would discipline themselves to keep a certain percentage of their monthly income for investment purposes and use the remainder.
Many books and financial gurus would recommend you keep aside 10% of your monthly income for investment and use the other 90% of your monthly income for your family and livelihood.
Frankly, I do not know where these numbers of 10/90% come from and if they still work in today’s fast economy.
I do not follow this “formula”.
I use my own “50/25/25” rule.
It means I keep 50% of my monthly income for investment purposes. 25% for household expenditures, and the remaining 25% is for emergency fund, charity, and a bit of family enjoyment etc.
I work within this formula strictly.
To many people, my formula of 50/25/25 is hard to attain. But I feel that it is easier that you might think.
One of the best ways to overcome this “problem” is to increase your earnings. And there are several ways you can do to achieve this.
If you are a business owner, think of ways to increase your value in your product or service offerings and increase your price and profit margin accordingly.
If you are a salesperson, focus your time and energy with clients who have greater needs for your product or services. They will buy at your price. They will give you more referrals than you can count.
If you are an employee, make yourself so great in your job that your employer cannot live without you but to increase your salary package just to keep you and his business running. Just tactfully “hint” to your employer that you may be leaving to work for his competitors.
You may think that these 3 ways just described are too “idealistic” in the real world. But before you jump to another other conclusion, please take a back seat and think deeply about the 3 ways. You will be surprised at how easy they are for you to implement to increase your financial lifestyle.
I hope you see yourself in any of the 3 categories of people mentioned above. They are meant to help you identify your current financial lifestyle and improve it.
I hope you would also realize that only the Money Keepers are the people who will get richer and richer over time. It is my intention that you join us in this category.
Thank you for reading this article.
I wish you well financially.
CEO and Founder, AlgoInsights