Thursday, December 8, 2022

How To Find The Right Level of Financial Leverage For Your Life

What is Financial Leverage?

Financial leverage is the amount of financial debt and other obligations a person has.

It is all about paying off debt and finding ways to boost personal assets to achieve maximum success with the financial resources you have.

But debt is not always a bad thing, especially when it’s a wise choice.

Let’s use a debt example. Imagine you got a new job, which led to a new source of income. The new salary, combined with your savings, has made you debt-free. Your debt is now eliminated.

Let’s go the other way. If you have no debt, your financial leverage is zero.

Most of the debts people have are money-suckers. The interest and high fees are just money-burning monsters.

This is why we have to work harder to find a better way to work.

Making the Decision

Setting The Expectations

So you’ve decided to stop saving and start investing. Congratulations! After talking with a few friends, you’ve landed on the right amount. You’re happy with the investment portfolio your friends have established, or your bank’s portfolio. You want to feel secure and reach for the moon, so you’ve set a goal for your portfolio.

Before you begin, make a note of the budget you’ve decided to keep. How much is disposable income for you? What expenses are you trying to cut?

Once you’ve decided your financial leverage, there are a few more things to keep in mind:

Establish goals: What do you want to achieve with this portfolio? Retirement, buying a house, sending your children to college? These are your goals.

What is your goal?

Your objective is to create wealth and it’s not to try to avoid debt or risk. The only thing that is happening in your life is that you are now…

Do you want the wealth and financial freedom that having wealth can bring to your life?

If you’re serious about it, you need to start thinking outside of the box, and maybe even get outside your house.

Success doesn’t mean you need to work harder.

It means you need to change the game.

Success does not need to be calculated in terms of money, or physical achievements, but instead needs to be determined by how many different options you can create for yourself and how much influence you have on the life you want to live.

When people who we care about do not measure up to our goals, we are generally not that surprised when they give up.

What is your risk tolerance?

The next question to ask yourself is how much financial leverage you want to have in your life.

You can have a very high level of financial leverage and still be stressed out at the end of the day. On the other hand, you can have a very low level of financial leverage and not care at all about your money.

As a successful business coach, I’ve had clients that felt they needed to spend a lot of time and money on their finances to be good with money.

On the other hand, I’ve had clients who are well in debt and debt free.

I’ve had a friend that thought that saving money on food was no big deal and a big victory. I’ve also had a friend that is very nervous about using his ATM card to get cash.

I believe it all comes down to a choice.

What does your budget look like?

What if I told you that you could upgrade your money life in 10 minutes and never make an extra penny? That’s exactly what the financial guru Ramit Sethi does in this post titled “How To Find The Right Level Of Financial Leverage For Your Life.”

His hypothesis is that at various points in your life you’ll likely feel like you’re spending too much, too little or just right. Some people have a high level of financial leverage, but others don’t have enough. I was tempted to say “debt” and all of a sudden I felt nervous. A ton of debt?” I know in my life I have, but I don’t have a ton of debt.

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