Changing Your Finacial Profiles

Most people fall into three general financial profiles. They either spend above their means, spend just what they have, or they spend less than their means. There have been studies done which show that 90% of the world’s wealth is held by 10% of the population, and that even if this wealth were redistributed equally, it would be back in the hands of the 10% within seven years. This illustrates that most people would find it difficult to change their normal spending habits, but in fact, this is the most important thing to guarantee personal financial health.

What this comes down to is learning what profile you fit in, and then learning how to change those spending, budgeting, and saving habits to meet your goals. Although many of these strategies will require discipline, the long term goals are clear: once you decide on a path, make the commitment to stick to it and you will find within a few months, you will begin adjusting your lifestyle to your new financial habits, which will, in turn, reinforce these new practices. Remember, nothing comes for free – long term financial goals require short term sacrifices, the trick is to find the right compromise that allows you to meet those long term goals while still enjoying life to the fullest in the short term.

If you often spend more than your needs, your best first step is to focus on a budget, looking for areas that are unnecessary and can be trimmed, and be prepared to have the discipline to stick to your new budget. If you often spend to your means, your best starting point is look for opportunities to build up your savings, which helps to reduce the risk and impact of unexpected expenses, and allows you to begin saving for the future. If you often spend below your means, you are in a good position to save to the future and should focus on savings that are structured to provide for better return on retirement, although, don’t forget to still enjoy life in the interim as many people that spend below their needs end up with a full bank account and regrets on missed opportunities and experiences.