The Tribune

By RICARDO EVANGELISTA

ActivTrades

Financial literacy and emotional control matter at least as much as income in determining how wealthy someone is likely to become. Managing money can be a challenge for many people, regardless of their income level. The reasons for this are complex, but one key factor is the role of emotions in financial decision-making.

Fear, anxiety and impulsiveness can all affect how we manage money. For example, fear of missing out (FOMO) can cause individuals to overspend and make impulsive purchases, while anxiety can lead to over-saving and hoarding money.

Furthermore, managing money can be challenging even for those who have a lot of it. Some may have a high income, but still struggle with their finances due to poor financial planning or overspending. On the other hand, some people who have a lower income manage their money well and become wealthy through smart investments and careful spending.

One example of a person who managed their money well despite starting-off with a low income is Chris Gardner, on whom the film The Pursuit of Happiness is based. Gardner was homeless and struggling to make ends meet while raising his young son. He took a chance on an unpaid internship at a stock brokerage firm and eventually worked his way up to becoming a successful investor and entrepreneur. Gardner’s story is a testament to the power of determination and hard work in overcoming financial obstacles.

On the other hand, there are many examples of wealthy individuals who end up destitute due to their inability to manage personal finances. One such case is former NBA player Antoine Walker. Despite earning more than $100m during his career, Walker filed for bankruptcy in 2010 due to overspending and poor investments.

One reason why those with money struggle to save or invest is due to lifestyle inflation. Lifestyle inflation occurs when individuals raise their spending as their income increases. As a result, they may find it challenging to save or invest money.

Another reason why many battle to save or invest is due to a lack of financial literacy. Many adults have never been taught how to manage their money in school or at home, and they may not know where to start when it comes to financial planning. Without proper guidance, they may struggle to make informed financial decisions – even those with high-flying careers.

Overspending can have a significant impact on our financial health. When we spend more than we earn, we accumulate debt and may struggle to save money for emergencies or investments. On the other hand, over-saving can also be detrimental to our financial health. When we hoard money, failing to invest at least part of it, we miss potential investment returns, become more exposed to inflation and may not have enough to retire comfortably.

In conclusion, managing money can be a difficult task, even for high earners. The role of emotions in financial decision-making, lifestyle inflation and a lack of financial literacy are just a few of the reasons why people struggle to manage their finances. However, it is possible to become financially stable and wealthy through careful planning, smart investments and sensible spending.