There is a common misconception that earning a higher salary will lead to financial stability. Unfortunately if your goal is simply to make more money without having a money management plan in place you are likely setting yourself up for disappointment.
People who achieve their goals of increasing their salary often don’t realize that as their salary grows so do their spending habits. How many times have you read about celebrities filing for bankruptcy or experiencing extreme financial hardships? Have you ever wondered how someone who has made so much money can end up broke?How you spend your money, how much money you save, how you invest your money and the choices you make regarding other financial decisions will all have an impact on your current lifestyle and your retirement years. Therefore the mere fact that you earn more money doesn’t guarantee you will find financial stability if you do not make wise financial decisions.You can be rich, middle class or poor, it doesn’t matter what income bracket you fall in because most of us are creatures of habit. The more you earn, the more you spend. That is why it is so important to manage your money well to secure financial stability. Avoid the following mistakes that people often make when their salary increases. Don’t overspend just because you have money The biggest reason for people who earn a comfortable salary having financial problems is overspending. If you live within your means (even if those means are better than when you earned less money) you can avoid some of the problems that befall other wealthy individuals. Better yet, if you live below your means you can continue to invest your money in order for your wealth to grow.
Use credit wisely
With an increased income you will find more credit opportunities. Do not fall into the trap of using credit excessively just because you have more money to pay the bill each month. Paying interest is not a good idea for someone earning 20K a year or someone earning 200K a year. It is still wasting money that could be better used somewhere else in your budget.
Be prepared for the unexpected
Again, this tip applies to people of all income levels, however many people stop following common sense advice once their income increases. Keep in mind that no matter how much money your make, the unexpected might happen to disrupt your income potential. Even if you are managing your money responsibly a serious illness or accident can occur making you unable to work or run your business.In conclusion making a lot of money does not guarantee you will have a lot of money. Regardless if you are rich or poor, if you want to be successful you must save and invest wisely and maintain control of your spending habits.
Trisha Wagner is a freelance writer for DepositAccounts.com, where you can compare rates from dozens of banks in one place. Trisha writes regularly on the topics of personal finance and saving money.
About Guest Writer
This post was written by a guest writer. If you’d like to add a guest post in Money Hacker, please check out Write for Us page for details about how YOU can share your knowledge with our community.