- April 26, 2014
- Category: Latest
If we had our way, then we would want to amass us much money as we could in the most effortless way possible. However, because money proverbially does not grow on trees, this means that we would have to contend with having just enough. Thankfully though, you do not have to worry about the shortage of cash for as long as you instinctively know what to do with the money that you do have.
In the same way that we train our appetites so that we naturally control the amount of calories we consume, it’s also just as crucial for us to shape our financial judgment through deliberate training. Once you have already ingrained it in your subconscious how to spend your money wisely, then you wouldn’t have any with unexpected expenses anymore.
Can you Afford the Risk?
With so many get rich quick schemes, you wonder why food stamps are still in high demand. But then again, these hare-brained shenanigans promise you everything but fail to deliver credibility. On the other end of the scheme, the stock market has been the subject of a lot of hype lately. It’s no longer unusual for us to hear about some investor striking it big through trading. However, just like with those get rich quick schemes, you have to ask this very important question – what’s the catch? Although these platforms are legitimate, the problem is that for you to get the most out of your money in the fastest way possible major risks have to be involved. Now another question: can you afford the risk? If you aren’t saddled with the responsibilities of a family yet and you can afford to lose a large amount of money betting on a chance of a windfall, then, by all means, go for as much risk as you can. However, if you honestly cannot bounce back from a financial upset, such as when you are getting ready to retire or when you have steep home payments to make, then opt to invest in something that gives you solid, albeit small, gains and isn’t risk averse.
Can you Afford the Payments?
It seems like, in order for individuals to own anything, one has to rack up considerable debt. While there is nothing wrong in getting a mortgage in order for you to finance your new home or to get an auto loan to acquire a new car, the question you should ask yourself is this – can you afford to make the payments?
Nick Scali on twitter advises that when acquiring a new house, you can only afford to pay 28 percent of your annual gross income towards your mortgage. This means that if your annual gross income is at $40,000, then multiplying that amount to .28 is the maximum limit that you can afford to pay per year. In this case, it would be $11,200. Divide $11,200 by 12 months, then that would lead you to a monthly payment of $933. Furthermore, the amount you pay per month should not exceed 36 per cent of how much you make in a monthly basis.
Kent Farell, the savvy financial writer, is a registered financial planner as well. His blog provides the best insights on financial management and tips for those who wish to save more. He also shares intelligent articles about investing, financial management and lease financing.
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