Your Finances, Your Future

For years you have been carrying credit card debt and strapped with a car payment. But you finally ‘made it,’ and all the once faraway promises of your chosen career are beginning to come true. Is being a fiscally responsible person your whole life, the first imperative of your newly liberated financial agenda? Pay off outstanding

It is commonly held belief that house pets of the terrarium or fishbowl persuasion will grow only to meet the dimensions of their habitats. So too might this rule be applied to individual finance in what is called lifestyle inflation. When our purchasing power suddenly grows because of success, we often fall into this trap by upgrading where we shop, where we eat and how we dress.

In so many words, we adjust our spending to meet our ability to spend. Instead of drip coffee from home, we regularly ‘splurge’ on an equivalent cup on the way to work (plus a croissant). Of course, certain business environments require you embody the successful image your company means to project, but who can tell that you spent $10 instead of $100 for dinner last night?

The golden rule of savings: spend less than you make

This painful oversimplification applies to your entire financial existence. Debt equals you needing financial help.  Once credit cards are paid off, don’t take on new revolving credit. Your house is the perfect example of the ‘fish tank’ metaphor. Taxes, neighborhood fees and the overhead from the oversized upkeep and maintenance of that “dream home” can quickly translate into new debt.

Finally, open a savings account and pay yourself first. The measurable, sustained growth of your savings is the product of percentages: if you get a raise, a bonus or a bump from a sudden inheritance, be sure to save a percentage of that new income that is consistent with what you already put in savings each month. If you save 10% of what you make, that rule should always apply to any new income saved.