When Inflow Is Sufficient But Finances Aren’t Growing, Deal With The Leakages
There are some who have notable equity increases over time while others, on the other hand, just keep on breathing out money every single day. In the end, those stuck in the latter situation could end up spending more than what they actually have. In worse cases, they may end up spending more than what they have and what they are expected to have, which means that money that hasn’t even arrived is already spent.
Though this could be maximized for income-generating pursuits, it could end up detrimental if people keep on spending money (especially money that they don’t have) on things that don’t help them with their financial goals. Thus, the key is to deal with these mistakes and make changes as soon and as much as possible.
(Note: Though there are those who are really in deep financial troubles and who have a hard time dealing with and increasing their meager inflow, there are those who are earning enough (or even more than enough) yet still, end up with deficits or down-trending finances. This article is dedicated to the latter.)
Why doesn’t your money grow?
For those earning a sufficient regular salary or who have sufficient regular inflow, it’s clear that there is both inflow and outflow that could be expected on a monthly basis. Bills, groceries, and transportation expenses are just some of the regular expenses that one has to make in order to live through each day. At times, the monthly inflow is enough or even more than enough to handle these essential expenses.
However, there are instances when despite the sufficiency or even abundance of such inflow, overall finances don’t seem to increase. In worse cases, the person may be left with nothing to set aside for savings or investments. Because of this, these individuals may be forced to live from paycheck to paycheck. Thus, when financial emergencies (such as unemployment) hit, these people could be left in tough spots.
This happens because of various possible reasons that may be relevant for some but not for others. Nevertheless, here are some common leakages in finances that may be worth addressing.
1. Excessive and unnecessary spending
As stated by Emily Norris through Investopedia, “Great fortunes are often lost one dollar at a time.” Great wealth doesn’t dissolve immediately; losses are incurred little by little. Though getting a cup of coffee from a coffee shop every morning or having regular dinner outs could seem harmless, these seemingly little things end up adding up.
For example, getting a $3 coffee five days a week for 52 weeks would mean that a total of $780 would be spent each year on morning coffee alone. If one spends $20 a week on dining out, this would mean that around $1040 is spent on dining out each year. Instead of using this money for coffee, dining out, or other expenses, such money could be allotted for other better purposes.
2. Having no emergency fund
Back in 2015, nobody could have guessed what would happen 5 years later. Last 2020, the livelihood of many got threatened. Other than that, unforeseen medical bills also greeted many people. One of the things that can be learned from the unexpected global health crisis is the need for an emergency fund.
Having an emergency fund could help people prepare for financial risks and emergencies that may happen in the future. One financial risk that is taken for granted is unemployment. If a person is living from paycheck to paycheck, this would mean that this person may experience great financial difficulties if unemployment hits.
3. Putting off and procrastinating personal finance
Choosing to put financial planning on hold could lead people to miss out on good opportunities. Other than that, delaying financial planning may increase one’s list of things to do. Because of such delays, people may end up forced to spend more later on.
Instead of procrastinating personal finance, people can opt to break their finances into manageable sizes. Organizing one’s finances does not need to be done overnight, but ignoring the task at hand won’t solve it. Allotting time once a week or month to assess finances and evaluate goals would be helpful.
Though there are more leakages that lead to diminishing finances, these are some notable ones that could be worth addressing, Hopefully, with these leakages fixed, people would be more in control of their finances and would see the results of their efforts in their own financial journey.
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