Your Personal Finance Weather

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Today morning I went out to my backyard, to enjoy a beautiful day of the weekend.

The weather was really nice, neither sunny nor gloomy or raining.

This is very rare in the Texas weather. Most of the days in Texas are either very sunny or raining heavily.

As I enjoyed the nice weather and wondered how lucky I was to get one this weekend (when I am relatively free to relax in my backyard), a thought related to personal finance came into mind.

Now you must be thinking – this is crazy. Talking about the weather is nothing new. Everyone does it to initiate small talk and it’s called that for a reason. There is no depth in talking about weather.

But when I thought about the similarity of personal finance to the Texas weather, I realized it has a deeper similarity to the state of finances for most people.

Let’s see the 3 states of the weather and the corresponding personal finance analogy.

The scorching sun

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The sun looks good and bright. However the scorching heat and the rays do not let you stay outside for long. You get that burning feeling on your skin.

Similarly in your personal finance, you can get burnt by obligations and debt. Some people either do not make enough money, or have gone into so much debt that their cash flow is bearing the brunt of those scorching debt payments.

The days when the sun shines so bright, you cannot do much. It is the nature and like everything in life, nature plays a part in your personal finances too. You are going to have bills to pay, fulfill obligations towards your family and community and pay down debt.

The rainy day

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We all heard about the phrase “rainy day”. It means that day when things do not go as expected. Of course personal finance also has a term called “rainy day fund”.

Here though we will equate the rain with a different state of personal finance. These are people who have an opposite problem as the ones we described in “the sun”.

These are people who make a lot of money but are equally struggling with their finances. Why? Simply because they are not disciplined or aware. They will spend, spend and spend.

A good example is a celebrity who died poor despite earning millions through their craft. Michael Jackson was a multi millionaire, yet died with $700 million of debt owed to the tax authorities. It is like money rained in his life but he did not know how to manage it, and made a messy swamp out of it.

The weather I experienced today

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When your personal finances are like that beautiful weather, neither hot nor damp or cold – you know you have achieved that balance.

Talk about heat? Well you have a cash flow that easily takes care of upcoming bills, not only the current month but you have provisions to pay taxes and annual bills at the end of the year. How to manage your cash flow

Insecure about your job or feeling the heat of the economy? No problem, you have 3-6 months of expenses saved up, so that you can search for another job if it comes to that. You also invest money to up-skill yourself continuously. One essential comfort zone

Even rain cannot make your finances go awry. When you earn more money, you don’t expand your lifestyle to fit the income. Instead of spending more, you live within your means and save more. The SAFE plan – Simple, Automated, Flexible and Efficient

Conclusion

At the end of the day, it is about your peace of mind and discipline. Rain or shine as they say, having good financial discipline means you do the same basic things like budgeting, living below your means, investing sensibly and educating yourself on personal finance. Five components of a personal finance system

For the education part, you can follow this blog.

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