The times are hard, the economy has changed – in favor of some, while some people are on the worse side. Times have changed, and so many people are in the worst financial crisis of their lifetime, and it might not get any better soon, certainly not if people don’t get the right orientation for their personal finance.
Someone’s personality is well reflected in their finance, and I categorize people based on financial status into six categories:
- The group that lives above their means
- The group that spend all they earn
- The group that blindly saves money
- The discipline group
- Financially independent
- Financially free
These categorizations were coined after a cognitive study on how people relate to their finances, either in the short term or long term.
Knowing what your financial status is, there is a need for you to understand the underlying principles and concepts of the financial world, as this will help you understand what really goes on in your category. Understanding your financial health will help you decide if you want to remain in your category, or you want to move up higher. You might have been working so hard before and wanting to enjoy the good things of life, but you are nowhere near where everyone dreams to be, you can’t even afford to live a quarter of such life, you need not kill yourself over this. There are core financial values that you should know, as it is your core value that determines the way you think and acts and hence the category of finance you live in.
Those that make money only to spend it all will remain there as long as they have that mindset, until they understand some core values to finances, and level up with the mindset of the financially free people. Just like the movie that says ‘Anybody Can Dance’, I would love you to know that “Anybody Can Be Rich”, but first, you need to understand these things:
- Saving to Income Ratio
- Debt to Income Ratio
- Emergency Fund Ratio
- Net Worth Ratio
- Investment Ratio
- Passive Income Ratio
It is imperative to see where you are in your finances, in your relationship with money, so you can improve your finances and make changes.
As money, like many things in life, the more you understand about “why” you do and think certain ways, the more successful you can be at fixing or building on where you are.
Here’s the cheat sheet to evaluate your financial health (Download HERE)
We wish your life to be always bright and best wishes for a Happy New Year 2021!