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Look into Past, Present, and Future for Your Financial Wellbeing

Present, and Future for Your Financial Wellbeing3

A penny saved is a penny earned is the fundamental rule to financial wellbeing. Spend less, save more, and invest in income-producing assets, but it is easier said than done. Everybody has different circumstances, and hence this approach cannot help you all. No matter how much income you earn, you are not alone, struggling to balance income and expenses. Of course, you know that you need to spend within your means, but despite trying harder not to come on the edge, many of you end up with financial collapse.

Financial wellbeing is a broader term. People generally think that you can easily maintain financial stability if you are earning more. The higher the money you make, the more financial security you will face. Well, this is a myth that theoretical knowledge can support only. When you come out of your bookish knowledge, you will find spending has a significant impact on your financial life.

If you are not able to keep up with all your expenses, you can never attain financial stability irrespective of your income. Your spending habit decides whether your account will be in the red or black at the month’s end. However, there are some external factors also that leave an impact on your finances. Inflation, economic conditions, volatile investment markets, and other factors can disrupt your financial situation.

The money you earn every month is not just for your present needs like groceries, mortgage payments, utilities, rent, and other expenses. You can get caught up in the present, but to take stock of where your money is going, divide your financial timeline into three sectors: past, present, and future. When it comes to finding out where your money is going and causing you to spend a large chunk of cash, you should get a bank statement. Now comes to the role of segregating expenses into three financial timelines.

Financial timelines are interconnected with each other

As you get your bank statement, highlight the past and present expenses with different colours so that you know precisely what I responsible for money draining away. Past costs will be in the form of debt you have been carrying forward to date, for instance, loans for bad credit with no guarantor, credit card bills, instalment loans, etc.

If your present income is going toward the debt repayment, it indicates that you had not saved money for the expenses that arose at that time. As a result, you borrowed money. You could have ignored taking out a loan if you had saved enough money for those expenses or had put them off until enough cash inflows. Now you must have understood how your past spending established a relationship with your current financial condition.

However, it will also have an impact on your future expenses. Debt is a solemn obligation: if you do not pay them off as quickly as possible, you will continue to spend more of your present money on past purchases that can grow a debt spiral. As a result, you will hardly have left any money for your future expenses.

If you find out your past expenses are not currently hitting your finances, you will likely be in better condition. Usually, most of your money is going toward present costs, but it is not always a favourable. For instance, if you still have past expenses, you will have to cut back. Cutting down on your present costs is an excellent way to move ahead. However, even if you are free from all debt obligations, you may need to whittle down your spending to stash away money for future expenses like preparing a down payment for your mortgage, wedding expenses, and the like.

Now you have come to know that how your expenses can show an impact on your overall financial wellbeing. It is crucial that you carefully spend your money to achieve your financial goals.

How can you adjust your present expenses not to suffer in the future?

By adjusting your present expenses, not only will you be able to settle all your dues quickly, but you will be able to set aside money for your future payments. Here is how you can do it.

Stick to a budget

Many people overlook the importance of budgeting, as it seems complicated to have a record of all expenses. If you successfully make a budget, you are always struggling to stick to it. However, there are some other factors like layoffs and unexpected expenditure that makes it harder to stick to your goal.

Financial experts recommend taking stock of recurring expenses, for instance, gym membership, magazine subscriptions, and other costs you are making, but you do not need it. With budgeting, you will be able to get an idea of where your money is going and where you can cut down.

If you want to take care of future expenses, you must know your present financial condition and be as better as possible. The more money you save in the present, the more money you will have for your future expenses.

Build an emergency cushion

As you know that unexpected expenses can pop up anytime, you must have some money set aside for a rainy day. You may come up with a medical emergency, your car can break down, or your laptop may need a repair. Unexpected expenses are generally responsible for hitting your finances worse.

It is why you should stash away some money. If you had an emergency cushion, you could avoid dipping into savings for planned future expenses. A good rule of thumb says that you should have at least three-month worth of emergency funds so as not to fall into your savings for your retirement funds and down mortgage payment.

Do not just rely on small savings

Small savings will not be enough for financial stability. To have a sound financial position down the road, you should invest in income-producing assets. However, you need to make sure that you can afford to bear the risk. While it is crucial for contributing money towards your emergency cushion and savings for your short-term and long-term goals, you need to build your wealth to mitigate external factors’ impact.

If you want to gain financial stability, you need to understand that your spending does not affect your current circumstances. The more careful you are with managing your money, the better it is.

Description: Financial timelines are interconnected with each other. Expenses you make in the past will have a significant impact on your present and future circumstances, so make sure you are careful with your money.