Your financial health would improve if not is a contemplating the issues q ue we’ll see in this article. The bottom like is that you will learn to better manage their money, considering the savings, investments and expenses. The ideal is to encourage savings and investment and reduce expenses. The debt control is crucial to have a financial situation better off.
It should be noted first of all that our financial situation does not depend solely on income. For the same income level or even lower, someone may be living more glibly.
Why is it so important to control costs?
1. If you spend beyond their means, into debt.
2. If you spend all the input, you can not save or invest.
The impact of debt then we will see them and the impact of the lack of savings and investment will see in the next.
Suppose these two cases:
-Sandra earns 40,000 euros a year. She has saved $ 4,000. He left to pay 285,000 euros of mortgage for your floor within 25 years, € 25,000 loan your car and have 18,000 euros of deferred payments on your credit card.
-Alberto earns 20,000 euros a year. It has saved 26,000 euros. He did not leave to pay 23,000 euros to the mortgage on your floor in 10 years, no car nor should any of your credit cards. Learn more about your debt settlement procedure at http://debt-settlement-review.toptenreviews.com
Who do you think lives more peaceful?
We see that Sandra earns twice as Alberto, which it could be concluded only by this data that lives the first than the second.
However, it turns out that Sandra should between mortgage, car loan and credit card debt total of 328,000 euros, while Alberto only be 23,000 euros. With $ 4,000 saved Sandra can not cover or 2% of your total debt. Instead, Alberto with saved 26,000 euros can cover 100% of your debt and you would even $ 3,000 for contingency.
Given an interest rate of 3% for the mortgages of both, Sandra would pay a fee of 1,350 euros per month, and Alberto only 213 euros a month. Of course, there is a big difference.
Imagine that Alberto is reduced by 20% of its income Sandra and 30% (approximately, considering that our tax system is progressive, and as you enter more money, is going to raise the personal income tax rate). Therefore, Alberto would enter the year 16,000 28,000 euros net and Sandra euros net. There is a difference, no doubt. If you receive both 14 payments: Alberto charged monthly about 1150 euros / month and Sandra takes 2,000 euros / month.
As Sandra has to pay 250 euros a month for the loan of his car and 500 euros per month for the credit card, in total you have to pay 750 euros. Consequently, Sandra takes 2,000 euros a month and have expenses amounting to 2,100 euros a month, not including household expenses, food, etc.. It is clearly not a sustainable situation over time. You can temporarily compensate their savings and pay extra 2 until you run out of savings or you encounter an unforeseen that may lead to having to borrow more in order to cover it, and then “the ball would be bigger” and end in the Sandra bankruptcy.
Alberto’s case is that charges 1,150 euros a month but only pay 213 euros of mortgage and has no debt. It turns out that each month is 937 euros for costs and even have 26,000 euros of savings in case there is something unexpected (low or stop that posed a temporary reduction of income, pour house, damaged electrical appliances, renovation of the house, etc..
Alberto can live in calm and sleep well at night because in the present has a healthy economy. It seems to have saver profile, so possibly intended each month a portion of your income to savings.
Even losing their jobs, Alberto reaction would have room. Sandra’s case would be dramatic, because a strong reduction of their income would undoubtedly its bankruptcy.
In conclusion, without control of costs and the level of debt, you can reach a limit bury harm our financial well being and our quality of life. Later more, borrowing prevents saving and investment, which are the engines the creation of wealth and prosperity.