While the rising cost of living is putting pressure on people’s pocketbooks, it isn’t the only cause of financial suffering. Many other factors are contributing to the fact that only a small subset of the population seems to have any money.
The good news is that you can take this information and apply it to your life to prevent you from falling into the same traps that affect other people. Here’s what you need to know.
Stagnating Income
Ideally, your income should rise over the course of your lifetime, in line with your productivity. That’s one of the reasons senior workers earn significantly more than junior ones – they have more experience, so can provide more value with the time available.
However, stagnating income is a risk in many professions. Not being able to earn beyond a certain threshold makes it more likely you will fall foul of the cost of living trap.
For this reason, it is critical to engage in life-long learning. You need to keep your skills up to date to ensure you are in the best position possible to earn top salaries.
Bad Financial Habits
Your income might also be stagnating because of poor financial habits. If you regularly splurge or buy things that are expensive to run, you could be depriving yourself of a better life in the future.
The worst spending habits are those that cause you to go into debt. Not only do these deny you the opportunity to save, but they cost you more money than if you had simply purchased them out of income.
High Healthcare Costs
Another problem many people encounter is high healthcare costs. The price of insurance is rising, and a lot of people don’t know how to manage it.
One approach is to go to a health insurance broker. These professionals can check prices for you and introduce you to the best deals.
The other approach is to adopt healthier lifestyle behaviors and communicate these to your insurer. Doing this can lower premiums significantly if they believe you are lower risk.
Investment Losses
You can also seriously damage your long-term finances by taking huge investment losses. Capital takes a significant time to accumulate, but when you lose it, you not only lose the principal but also all the interest it could accrue during the time you are building it back up.
That’s why it is critical to make wise investment decisions. Don’t simply follow the crowd.
Educational Expenses
Another source of poor finances is educational expenses. Many people go to college, believing it will set them up for a prosperous life, only to find that suitable positions are unavailable when they enter the job market. This reduces the return on investment and saddles them with debt.
If you are considering education, ensure you only choose options likely to result in financial returns. Avoid the myth that education is valuable for its own sake. Financially speaking, it is not.
So there you have it: some of the reasons your finances are suffering that don’t have anything to do with inflation, and what you can do about it.
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