Income and Quality of Life

Salary should be part of what you look for in a job, but if you just focus on how much you will be making you are setting yourself up for problems. If you make $60,000 per year, but live in an area where the average house costs $500,000 per year you may be better off taking a job for $30,000 per year where you can buy the same size house for $80,000. Most people tend to look at their yearly income, but forget to pay any attention to their living expenses. You’ll be able to pay off a $80,000 house off much quicker on a $30,000 per year salary than trying to pay off a $500,000 house on a $60,000 salary. On top of that if the real estate market takes a dive, the $500,000 is likely to lose a whole lot more value than the less expensive house.

There are a host of other expenses to consider as well. If you take an expensive job somewhere that requires a two-hour commute each way the cost is really going to add up. Even more important than the cost of gas and mileage, is the amount of your life that you’ll be giving away. If you end up in traffic for 4 hours each day, you could just as easily take a lower paying job near your home and spend your reclaimed commute time working at McDonalds 20 hours per week. By the time you consider all the expenses it is quit possible you’d come out ahead from a financial standpoint.

It isn’t just about the money. You need consider how taking a particular job will impact your financial situation and entire quality of life. Money is an important ingredient in the quality of life mix, but it isn’t the only part. Many people think they are rich because they are making a lot of money when in reality they are poorer than people with much lower income living elsewhere.

You cannot just focus on your income you have to look at both your income and expenses in order to be able to make a good decision. You also cannot focus just on the money; you have to look at your entire life holistically. If you just look at one segment you can easily convince yourself that you are making a good decision, when in fact you are setting yourself up for poverty.

It isn’t how much you make that matters. What is more important is whether or not you are getting to live your life in a way that you are happy with. If you just focus on the money, you can convince yourself that you are happy with a situation that really amounts to living in poverty. Look at your life as a whole. Think about your free time, your family, your friends, etc. If you don’t you’ll get to retirement age and wonder where all the years went and why you didn’t spend them on things that were more important.

Benefits of using Credit Cards

Credit cards can get a lot of people in trouble. The interest rates are high and undisciplined shoppers can acquire a huge amount of debt very quickly. However there are many benefits in using a credit card for your purchases. For example: credit cards can be one of the most useful tools in tracking your expenses. They way they work is beautiful and simple. You make a purchase on your credit card, the charge is sent to the bank, the bank approves the transaction, and the bank posts it on a website or makes it available for you to download into your personal financial software.

You can’t beat the ease of use for record keeping. It almost happens automatically. For people who pay the balance at the end of each month there is no expense for this service. In fact with the reward programs available on most cards, banks basically pay you to use the card.

Of course this only works because many people do not pay their balance at the end of the month. If no one carried a balance, the banks would start losing money and they definitely would not have any of those programs that give you free sky miles or points toward buying books and electronics.

The average amount owed by an American with a credit card is over $8,000. For the banks this is a windfall. The interest rate on credit cards is very high–much higher than other types of loans. Banks make a tremendous amount of money of people carrying balances.

If you have the financial discipline to pay off your balance at the end of each month and track your credit card expenses just like a checking account, you will basically get the credit card services for free–paid for by people who do not pay off their balance each month.

You get free record keeping, free reward points, and many other features. Many credit cards offer some type of insurance if your purchase is stolen. Others offer extra life insurance policies for air travel booked on their cards or free rental car insurance. Some credit card companies offer extended warrantees on certain types of items purchased with their credit card.

One of the most important benefits of a credit card company is the fact that they will usually stand up for a good customer that is being charged incorrectly. For example, assume you cancel an order with a merchant and they ship you the goods anyway. When you try to return the items, the merchant says that you can’t. A quick call to your credit card company will probably be all that is necessary to resolve the situation. Credit card companies can revoke money from merchants and this is exactly what they will do if you complain that you were shipped an item that was canceled. That means instead of you spending hours on the phone trying to resolve the situation, your credit card company will call the merchant and tell them that you didn’t want the item and that they are revoking payment. Naturally the company is going to let you return the item so they don’t lose the item and the payment.

There are many benefits you can obtain by using a credit card–all for free as long as you pay off your balance at the end of each month. Other people aren’t going to pay off the balance and they are paying for you to get free service. Many of these benefits are found in the fine print of your statement or in the paperwork that came with the card in the first place. Make sure you understand how everything works because the benefits differ from card to card.

Keeping Track of Your Finances

One of the most important steps in controlling your finances is simply tracking where your money goes. You can’t manage your money unless you understand where it is going. Many people don’t track their expenses unless they are under financial strain. When finances are tight people tend to allocated money to different categories and then try to stay within the amount allocated. This is commonly called a budget.

Keeping track of your finances when you are not in a financial bind has many benefits. For one you can get a good view of your spending as it is instead of trying to control it. Understanding your spending habits can be very insightful. You may find that you are happy with how you spend your money. It is also possible that you’ll find some areas where you are spending more than you really feel is necessary. For example, many people find that they spend much more on eating out than they realize. Once they realize this, they may decide that investing in a grill for their home is better use of their resources and more in line with their priorities. It is also possible to discover that you aren’t spending as much as you’d like in certain areas. Savings and charitable giving are two areas that come to mind, but you may find that your spending doesn’t reflect your true interests and want to allocate more money to certain activities.

By keeping a record of where your money goes, you are better able to understand yourself. It is much easier to start this discipline when you aren’t hurting financially because there is no pressure. You don’t have to change your behavior; you just want to understand it.