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Spending and Investing Balance Extremes

2011 Dec 22

 

Balance is one of the most astonishing things over life. Isn’t it strange that people actually like to balance on many things. Of course most of the times balancing on the edge is risky, but it is how it is. The world (and maybe the universe too) is build this way. 

 

If you disagree that most of the people are balancing on the edge, let me give you simple example, and you’ll be convinced that they are. This example is the balance sheet (spending and investing) of households or simple persons as you and me. If you follow the surveys that show a savings of households you should be surprised how many of people are living from payday to payday. And I can tell you that this is balancing on the edge. 

 

To live from payday to payday means not to have any significant savings. And this is of course very risky. Some people even cannot live to payday and for the last week or two borrow money from friends or microcredit companies or other financial intermediaries. But such lifestyle is a disaster. 

 

Such lifestyle doesn’t provide any safety and is extremely risky. What if financial crisis will make to lose your job and you won’t be to find another? What if you will get in a car accident (and your insurance will run out) and you fill face huge obligations for the consequences and lose your working capacity. What if you will have serious health problems? No one’s life is for sure. Bad things happen all the time to someone and bad things actually happen more often that goods thing happen. That is why you have to be prepared for bad things. Of course you can’t resist bad things but you have to do what you can do.

 

And first thing you can do and should do is to create some financial safety. You don’t have to make millions in your account, but you should not depend on the last payday, because you will just not have another payday. People get fired all the time. You should have at least a savings or investments equal to twelve year income of yours. It will make your life more secure in financial way. 

 

If living from payday to payday is an extreme, another extreme is to sacrifice your life for investing. Maybe this case is not so wide spread but we can see such example too if get in touch with rich people. Some cases are popular and well known when extremely rich people are spending less money that homeless people. 

 

The core of this extreme is that some persons over concentrate on investing as a life goal and forgets to live. All they think is to get richer and richer and there are no limits for them and they show their lifestyle as an example. But this is mistake. Investing is not for investing. The goal of investing is to enrich your life not financially but in all the ways. If you forget about life for investing, that means the purpose of investment has failed. 

 

Every investor should not forget to enjoy the life, because life is short-term gift that must be exploited as more as possible. Investing should help to do that but not limit it. It is hard to find the best balance of spending and investing for each investor because every person is very individual. But it is all about the balance. And it is good, that balance is a funny thing to do…

 

 

By Rokas Lukosius

 

Read the next article: Investment in Your Life

 

Other articles you may like:

Right Time to Stop Investing

Being Rich is a Lifestyle like Investing

When Is The Best Age For Beginning of Investing?





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