The 5 Common Factors That Affect Your Personal Finances
Few ever pay attention to these factors that affect their personal finances. Like most fortunate guys with a job, you look forward to your paycheck at every end of the week, fortnight or month. What you do with your cash is all upto you. But if you want to manage your personal finances well and succeed financially, you need to know what will affect your efforts for a brighter financial future. Don't pay attention to these factors and you will be struggling to make any progress to a life devoid of financial stress.
1. Income Tax - Pay As You Earn (PAYE)
The first thing that affects your personal finances, if you earn a regular income through formal employment, is the income tax. When you receive your payslip or paystub, what you notice are deductions. They include income tax and other statutory deductions such as social security and health insurance. These deductions eat your gross pay. The more you earn, the bigger your income tax deduction. However, no matter the size of your income, there are personal tax reliefs that you can take advantage of to reduce your income tax deduction hence increasing your net income.
2. Personal Expenses
The second thing that affects your personal finances are your personal expenses. Yap! Your basic personal expenses...rent, utility bills, groceries, regular car maintenance, home repairs, medical bills...you name it!. If you do not pay much attention on how much you are spending on these expenses vis-a-vis what you are saving and investing for your financial future, you will be courting a financial disaster. Managing your personal expenses through a spending plan is an effective way to keep track of where your money is going.
Have you been in this situation where come mid month you have nothing in your pocket and some expenses are still unpaid? ;) Sounds familiar! Huh! What is it that usually causes it?...Personal Expenses that you never pay much attention to.
3. Personal Desires
All human beings 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 smart phone, a new jewelry, gifts for your loved ones, a membership to a new social club, a big house-warming party in your new home...the list is endless. But you know what? Unchecked persuit of your personal desires will affect your personal finances. Especially when you can't pay, in cash, for them all . You will have to get some on credit.
4. Consumer Debt
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 you do not pay attention to your debt level. When your debt exceeds beyond the amount recommended by financial planners, you are in for trouble when you start defaulting on your debt payments.
Life isn't without surprises. You will come face to face with unexpected problems (emergencies). Stuff you never anticipated...your car breaks down, you lose your job, you have get diagnosed with a terminal illness (God forbid), your roof is blown off by a hurricane or thieves break into your house and steal your valuables. Such emergencies when they occur, do have a great impact on your personal finances especially if you had not considered risk management in your personal financial planning.
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