You finance everything you buy! When you read this you may have said to yourself, “I don’t finance anything, I pay cash”. Paying cash is financing, it is self-financing if the dollars you are spending were previously set aside for your future retirement lifestyle needs. stand.
From time to time it is easy to yield to the temptation to buy something we want for our current lifestyle robbing from the money we have put away for our future. This purchasing strategy can be very dangerous because of what is known as “Human Nature”.
Suppose you want to buy a new car. I am sure you have spent some time crunching the numbers to see if you can make the payments work in your budget. Hopefully you have also considered the increased cost of the insurance on the new car as well as the fuel costs.
Warning: If you have to borrow from your Future Lifestyle for a Current Lifestyle expense you could be heading for trouble. Warning: If someone or something can take it from you it is not really yours.
To arrive safely at your desired future financial destination make sure you obey all the warning signs.
I am sure you are familiar with the term net worth but do you know your collateral capacity? Some people can tell you exactly what their net worth is today while others are satisfied with just knowing about where they stand. Do you know your net worth? Knowing your Collateral Capacity could be just as valuable.
Your income potential represents the amount of money you can expect to flow through your hands over your lifetime. To calculate you take the amount of income you make today, adjust that amount for inflation over the remainder time period of your working years.
Perhaps this is a term you have never heard before. It is most often used in a conversation between lawyers trying to settle a claim in a legal battle in a wrongful death suit. Human Life Value is an attempt to determine the value of one’s life from an economic perspective.
For most of us our monthly cash flow is somewhat regular meaning we know about if not exactly how much money we will have coming in each month. We adjust our standard of living to that amount and everything seems to run pretty smoothly until something major comes along.